Friday 20th January 2012
Good morning. The Pound pushed a little higher against the Euro and US Dollar yesterday, tracking gains in the euro versus the dollar after solid demand at a Spanish debt auction, but its rise was limited by weak consumer confidence data that added to concerns about the UK economy. Below shows how GBP/EUR and GBP/USD moved yesterday:
~Currency Movements on Wednesday 18th January~
Good Demand at Spanish Bond Auction
At a bond auction yesterday, Spain sold 6.61 billion euros of government bonds which was more than its announced target, in an auction that analysts said went well. This caused the Pound to rise also due to it’s links to the Eurozone, so despite some slight gains as shown by the chart, rates remain stuck around the €1.19 to €1.20 level. Analysts have said that the Euro’s gains were likely to be limited as investors remain wary of any development that may cause the euro debt crisis to worsen significantly, with market players keeping a close watch on talks aimed at avoiding a messy Greek default.
For this reason, rates to buy and sell Euros remain around the €1.20 level where it has been for much of the week.
The news weakened the safe haven US Dollar slightly, making it cheaper to buy and pulling exchange rates up from the near 18 month low seen earlier in the week.
UK Data disappoints again, signalling more QE on the way
UK consumer confidence fell to pretty close to its lowest level in seven years last month, data showed yesterday. This has increased concerns over the fragile economy, and increases the risk of further Quantitative Easing next month. The last time QE was announced, Sterling fell significantly and exchange rates dropped across the board.
Of course due to the prediction of QE, it will be partly priced into the market prices already, and the EU debt crisis will also have an impact on the value of the Euro, Pound and US Dollar.
This is the latest is a run of poor economic data from the UK recently. Low inflation, and the number of Britons out of work at its highest in more than 17 years in November are all weighing on the Pound. UK GDP figures for the fourth quarter of 2011 are due next week, with some market players bracing themselves for very low growth or even a contraction in the economy.
Today’s UK release is Retail Sales; a good indicator of general consumer confidence. In Canada we will see the latest inflation figures. US data comprises Home Sales.
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