Pound falls as government divisions appear

Sterling slipped yesterday after Gordon Brown may face a leadership challenge before a general election, and this underlined uncertainty facing the Labour government. Rates @ 08:30am 7th January are as follows:

  • GBP/EUR 1.1092
  • GBP/USD 1.5937
  • GBP/AUD 1.7306
  • GBP/NZD 2.1629
  • GBP/CHF 1.6442
  • GBP/ZAR 11.702
  • GBP/JPY 147.74
  • GBP/NOK 9.0712
  • EUR/USD 1.4359

There was actually some better than expected services sector data for the UK, however despite this, fears over the UK’s fiscal position kept the pound on the back foot. This clearly demonstrates that despite better data, the UK’s debt and government uncertainty is stopping the pound gain against other currencies.

Leadership Challenge
Labour has been plunged into a civil war after a last-ditch coup attempt left Gordon Brown’s premiership in fresh turmoil. Senior Cabinet members took hours to issue apparently lukewarm statements of support for him after two former ministers demanded a secret ballot of MPs on his leadership.

The plotters claimed six Cabinet ministers were ready to support the ballot call but pulled out at the last minute. You can read a full review of the news on the BBC site. What is means for the currency markets, is that it shows the deep divisions and uncertainty within government. This then makes investors nrevous about the UK, and then sell Sterling. This sell off weakens the currency, and rates drop as we have seen this morning.

Todays Data
For the UK we have some house price data, and an interest rate decision by the Bank of England. we expect rates to be left on hold, but watch for any news of more support in the form of Quantitative Easing – this may weaken the pound further.

For the EU, we have lots of data. Retail Sales for Germany and the whole EU, Consumer Confidence and Economic Confidence for the EU. The Retail Sales are probably the most important. It’s a measure of changes in sales of the German retail sector. It shows the performance of the retail sector in the short term. Percent changes reflect the rate of changes of such sales.The changes are widely followed as an indicator of consumer spending.

In the USA, there are some jobless figures.

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