The Euro encountered strong resistance in the region of 1.3250 against the U.S Dollar and drifted weaker through the course of the day.
Sterling / Euro and US Dollar exchange rates
The Pound has remained resilient following the surprise announcement last week that the UK economy slumped into a technical recession during the first quarter. That’s either a sign of the increased demand for the Pound as a safe haven from the crisis in the Euro-zone or it’s indicative of just how weak the Euro and the U.S Dollar are at the moment.
The UK currency has traded up to a fresh 20-month high versus the Euro and a 7-month high against the Dollar. The upside momentum against the Dollar is showing no signs of abating. The 1.6170 resistance level was a key level in the market and now it looks increasingly likely that we’ll see a move towards 1.6450 over the coming days.
A report yesterday showed that UK house prices rose in April for a second consecutive month, with values up a modest 0.1% from the previous month. The report added to the overall optimism that the UK economy will bounce back from the slump and that the figures on GDP will be revised higher anyway over the coming weeks.
However, the Bank of England May announcement in 9-days will be watched closely, as policy makers will deliberate over whether to increase stimulus measures in light of the recent contraction in growth. Sterling sellers might be well placed to take advantage of the current rate to protect against the Pound losing a bit of appeal over the coming days, or at least consider the benefits of a stop order to protect against a reversal.
The Pound has advanced to a five-month high against the Australian Dollar, trading above 1.5650 overnight, after the Reserve Bank of Australia cut interest rates by more than the market anticipated. Policy makers reacted to the slowdown in the economy but cutting rates by 0.5% to 3.75%, from 4/25%, the biggest single cut in three years.
The Aussie Dollar declined against all of the 16 most actively traded currencies and the UK currency also rose towards the 2.00 mark versus the New Zealand Dollar. The bigger cut in rates was almost immediately justified, after a report on manufacturing in the region showed that output slumped to the lowest level in seven months.
The Pound’s relentless assault against the Euro and the U.S Dollar will be tested this morning, as a report on the PMI manufacturing data for April is set to be released. The report is expected to show that factory production declined from the elevated levels in March to post more modest growth in the sector. The UK currency slipped back from a 22-month high against the Euro last night, but a further advance may be likely, amid concern that the debt crisis in Europe is spreading.
The latest Swiss National Bank data showed an increase in reserves held in Sterling, which also provided underlying support to the Pound. The National Bank appears to be still intervening to cap franc gains and there will be further diversification of funds away from the Euro. The Pound also drifted weaker against the U.S Dollar, as the manufacturing figures this morning will have a bearing on the Bank of England rate announcement next week.
Euro / US Dollar
The Euro encountered strong resistance in the region of 1.3250 against the U.S Dollar and drifted weaker through the course of the day. The latest data confirmed that Spain had officially entered a recession with a first quarter GDP decline, although the decline was slightly less-than-expected. The latest Euro-zone money supply data was stronger-than-expected, but bank lending remained extremely weak.
Markets will be subdued by the May Day market holiday in the Euro-zone today, especially as it could fuel further protests over high unemployment levels. The latest French opinion polls continued to suggest a comfortable lead for the Socialist party, which maintained political uncertainty. In the U.S, the latest economic data failed to have any significant impact with the Chicago PMI index weaker-than-expected.
The U.S Dollar was still undermined by a lack of yield support and fresh speculation that there could be further quantitative easing. There was also caution ahead of the Friday employment data with some fears that the data could be weaker than expected. The Euro found support close to the 1.32 level and edged back towards 1.3250 over-night.
Data Released Today
U.K 09:28 CIPS Manufacturing PMI (April)
U.K 11:00 Land Registry House Prices (March)
U.S 15:00 Manufacturing ISM (April)
U.S 15:00 Construction Spending (March)
- The Pound remained in the ascendancy against the Euro exchange rate
- Pound Sterling, the Euro and US Dollar exchange rate news – The Pound remained in a tight trading range against both the Euro and the U.S Dollar
- Pound Sterling, the Euro and US Dollar exchange rate news flash – The Pound remained lower against the majority of the 16 most actively traded currencies
- Foreign Currency Exchange Rate Forecast – The Euro remained under pressure against the Dollar
- Sterling remained on the front foot against the Euro Exchange Rate