Friday 27th January 2012
Good morning. Sterling dropped yesterday to a 4 week low against the Euro on poor UK Retail Data, and hopes of progress in Greek debt talks bolstering the single currency. Against the US Dollar however, Sterling hit a 5 week high after a host of Economic data including Unemployment was much worse than expected, weakening the USD and making it cheaper to purchase. It’s these points I’ll cover today after the usual snapshot of yesterdays movements:
UK Data disappoints, weakening the Pound
Yesterdays UK data was the CBI Distributive Trades Survey, which is released by the Confederation of British Industry. It’s an indicator of short-term trends in the UK retail and wholesale distribution sector, and can have an impact on the formulation of economic policy at the Bank of England and within Government.
The forecast was for a 12% gain, however the actual figure was a 22% decline. The poor result reversed the gains made on Wednesday, and pushed GBP/EUR rates to a one month low.
Also Reports that private holders of Greek debt would accept a lower coupon on new bonds, and a successful short-term debt auction in Italy, encouraged investors to cut hefty short positions in the euro. In plain English, this means there is now more hope of progress with regards to Greek debt, and as a result the Euro gained some strength, becoming more expensive to purchase and compounding the drop in Pound/Euro rates.
Sterling climbs to 5 week high vs US Dollar
As has been the case for some time, GBP/USD rates have been trading inversely, as the debt crisis drives flows of investment into and out of the US Dollar. So as a result of the better outlook in the EU, the Dollar has weakened off slightly.
Of more importance was yesterdays economic data from the states. There were various measures of Jobless Claims and Homes Sales from the USA yesterday, and all of them were worse than forecast. This also weakened the US Dollar slightly. In the last week GBP/USD had hit an 18 month low, so the spike to the upside should please anybody that needs to buy Dollars.
We end the week with Consumer Confidence figures for the UK, Money Supply data from the Eurozone, and the USA releases its latest GDP figures in addition to a measure of Consumer Sentiment.
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