Pound:
Sterling has made a small number of gains this morning ahead of the final GDP figure for UK growth, last quarter. The pound is trading up 0.45% against the Euro and over half a percent against a generally weaker USD.
All three puppets, sorry finance ministers were having a “TV debate” last night, all agreeing to the need for spending cuts to reduce the biggest public hole in 20 years but as expected this stopped short of any detailed strategy. The possibility of a hung parliament continues to be thrown around the financial press at the moment despite some opinion polls pointing to a conservative party majority vote.
The pound may well be given a further short term boost if the GDP number exceeds what many economists expect will show an expansion of 0.3%. In positive news already being digested in the market, the Nationwide building society released data showing a 0.7% rise in prices against falls the previous month .
In other news out yesterday surrounding the UK’s creditworthiness, rating’s agency Standard and Poor’s affirmed the UK’s “AAA” rating but maintained a negative outlook. So far the day is starting well for sterling, allowing any sellers to take advantage whilst it lasts.
US Dollar:
For the last few weeks the dollar has been seen as a refuge when investors were particularly risk adverse. This trend has changed slightly as an overall improvement in the global economy has lifted sentiment. Consequently, investors and traders are moving away from the greenback and into riskier but higher yielding assets such as commodities.
An ever so slightly positive picture is being painted for the euro zone and as such the U.S. dollar dropped to $1.3510 per euro as of 7:13 a.m. in London from $1.3483 in New York yesterday, when it fell to $1.3527, the weakest since March 23. However, this slight move downwards on the back of improved data is no doubt a correction to a recent strong dollar performance of late. The dollar may regain its strength as early as Friday when March labour data is released, likely to show significant gains in new jobs. The euro’s “move higher against the dollar is likely to prove to be temporary,” said Jane Foley, research director at Forex.com in London.
A dollar sell-off in the Asian markets was due to Japanese exporters selling dollars in order to repatriate their earnings on the last regular settlement day of the nation’s fiscal year. This move down by the dollar in Asian markets will be short lived as the overbearing view of dollar strength is likely to see it hold above Y92.00 for the rest of the global day “as there seems to be a substantial accumulation of bids there,” said Shinichi Hayashi, a foreign exchange dealer at Shinkin Central Bank. Dollar trades down this morning against Sterling on market anticipation of improved U.K GDP figures out at 09:30GMT.
UPDATE : UK economic growth unexpectedly revised up to 0.4%
Euro:
The euro is enjoying some renewed strength this week on the back of improved market sentiment surrounding the future of Greece. As risk appetite returns investors are willing to take bets on assets such as euro zone stocks and, if they are feeling particularly brave, Greek government bonds, all helping to push the euro higher. France did its part in the recovery with figures showing its economy grew at the fastest pace since September 2007. I hate it when it rains on a parade but investors must proceed with caution as the outlook for the euro still remains very much on the negative side of things, let’s not forget the target of $1.20 per euro for the not too distant future. Whilst the most recent debt sale by Greece was well received, it is worth remembering that previous debt sales were also initially popular before prices fell sharply as traders booked profits and investors lost confidence.
This rally is good news for the euro zone but I fear it won’t test any major resistance levels to break new highs. This morning sees the euro up marginally against the dollar on the back of traders curbing their short positions for the time being. Despite recent gains in the euro, analysts saw limited upside potential for the single currency given that the euro zone’s debt problems and weak growth mean the European Central Bank is in no rush to hike interest rates.”This appears to be a short-term reprieve for the euro,” said John Horner, a currency strategist at Deutsche Bank.
Quote of the Day
“Spend some time alone every day.” – The Dalai Lama