Sterling up against Euro on risk sentiment

Thursday 20th October 2011
Good morning. Sterling rose yesterday and hit a 1 month high against the US Dollar, and was also up against the Euro. It was nothing to do with any particularly good data, rather it has been supported by better risk sentiment. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1477
• GBP/USD 1.5711
• GBP/AUD 1.5453
• GBP/NZD 1.9838
• GBP/CHF 1.4233
• GBP/CAD 1.6064
• GBP/ZAR 12.683
• GBP/JPY 120.44
• GBP/DKK 8.5436
• GBP/NOK 8.8596
• EUR/USD 1.3684

Sterling up on risk sentiment

Gains in European stock markets, and optimism that progress would be taken by euro zone policymakers towards solving the debt crisis pushed up sentiment towards the pound yesterday. Investors are returning to riskier currencies on the better EU outlook, and this helped the Pound gain against other currencies.

However, analysts are still saying that while there are signs that progress on tackling the euro zone debt crisis will be made this weekend, a comprehensive and a durable solution was unlikely and the UK would remain vulnerable to financial tensions in Europe.

The other factor that could pull the Pound back down is the risk of further stimulus by the Bank of England, especially after yesterdays BoE minutes hinted more asset purchases may be needed to help Britain’s ailing economy. In the minutes yesterday it showed that policymakers voted unanimously to resume quantitative easing (QE) this month, and considered injecting even more than the 75 billion pounds agreed. They did discuss up to £100bn in easing, and this signals that further QE may be on the cards. This will likely keep any gains for Sterling limited.

Today’s Data

UK Retail Sales figures are released today in addition to Nationwide Consumer Confidence, showing how confident consumers are about the economy. There are also inflation figures from Europe. Stateside we have various measures of unemployment.

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