The Pound maintained a firm tone against the Dollar for a third straight day, rising to a high close to 1.55.
by Adam Solomon
Sterling / Euro and US Dollar exchange rates
The Pound continued to lose momentum against the Euro exchange rate, falling back towards 1.1950 in early trading and from a technical perspective, the market seems to be edging lower with the main support level in the region of 1.1732. It is possible that the Pound will continue to depreciate versus the single currency, amid speculation of a contraction in economic growth during the fourth quarter and the possibility of further quantitative easing from the Bank of England.
Data this week showed that the number of Britons out of work and claiming jobless benefits had risen to 2.7 million in the quarter through November and government officials are becoming increasingly uneasy that the rising unemployment rate will push the economy into another recession. The Bank of England governor Mervyn King has reacted to the data by saying rising unemployment is threatening to cancel out the benefit of falling inflation on consumer spending and is threatening the economic recovery altogether.
The Pound continued to edge higher against the U.S Dollar, however, UK stocks rose for a fourth straight day, led by an increase in financial companies shares and the improvement in risk appetite reduced the appeal of the Dollar as a safe haven. The Euro rallied to the highest level in two weeks against the U.S Dollar, as positive auction results in Spain boosted optimism that the sovereign debt crisis is being contained.
The Pound maintained a firm tone against the Dollar exchange rate for a third straight day, rising to a high close to 1.55. Underlying confidence in the economic outlook remains very fragile and there were further long-term concerns surrounding the debt situation, as consumer credit levels remain high. There were also fears surrounding the banking sector, as balance sheets remained unsustainable from a longer-term perspective.
Although Euro-zone fears have eased slightly, there is still strong demand for UK bonds with benchmark yields remaining at record low levels following Thursday’s debt auction. While defensive demand remains strong, there will be scope for further underlying Sterling support even while the economic data continues to disappoint.
Euro / US Dollar exchange rates
The Euro exchange rate maintained a firmer tone against the Dollar and challenged near-term resistance levels in the region of 1.29. The latest Spanish bond auction was once again stronger-than-expected in terms of investor interest, which helped underpin the Euro. A solid French auction also maintained expectations that the ECB’s bullish stance was having a positive impact on liquidity.
There was mixed economic data in the U.S yesterday with housing starts slightly below expectations at an annual rate of 0.66 million. In contrast, there was a sharp drop in weekly jobless claims to 352,000 from 402,000 previously, while the Philly Fed index edged lower on the month. Consumer price inflation was unchanged for December with core prices rising just 0.1% but the data had a muted impact in the market with swings in risk sentiment the domineering factor.
Today’s Exchange Rate Data
U.K 09:30 – Retail Sales (December)
U.S 15:00 – Existing Home Sales (December)
- The Pound lost some momentum against the Euro exchange rate
- Pound Sterling, the Euro and US Dollar Currency News – The Pound struggled to sustain its momentum above 1.65 against the US Dollar exchange rate and dipped sharply through the course of the week to lows close to 1.6350
- Sterling Euro US Dollar Foreign Currency Forecast – The pound continued its current downward trajectory
- Pound Sterling, the Euro and US Dollar Currency News – The Pound struggled to sustain its momentum against the US Dollar
- Pound Sterling / Euro Exchange Rate: The Pound remained under pressure against the US Dollar Exchange Rate