The Pound remained largely unchanged against the Euro
Sterling / Euro and US Dollar exchange rates
The Pound remained largely unchanged against the Euro yesterday, hovering around the 1.25 level for the majority of the day. The UK currency declined significantly versus the U.S Dollar, falling below 1.59, as risk sentiment weakened in line with escalating concerns surrounding Greece and the Euro-zone debt crisis as a whole.
In the UK, the latest unemployment data was stronger-than-expected with a decline in the claimant count of 13,700 for April, following a revised decline the previous month. The jobless rate also declined to 8.2%, from 8.3% previously. Although the drop was primarily due to an increase in part-time employment, the figures masked the overall state of the labour market.
In the Bank of England’s quarterly inflation report, the MPC lowered its growth and inflation forecasts for the two year outlook. The main focus on the report tended to be the bank’s news conference with the governor Mervyn King stating there were substantial risks and uncertainties resulting from the Euro-zone debt crisis.
With lowering inflation forecasts and warning over the Euro-zone, there was additional speculation that the BoE will sanction additional quantitative easing over the next 2-3 months, especially if Euro-zone conditions deteriorated further. Although the Pound dipped to lows close to 1.59 against the Dollar, it was still able to secure defensive demand as benchmark yields fell to record lows and consolidated just above this level.
The decline in risk sentiment continued through the course of the day with stocks and commodity markets falling sharply. Nonetheless, the Australian and New Zealand Dollars rebounded from five months lows, amid speculation that the recent downside moves were excessive. The currencies rose versus the majority of the majors, as Asian stocks actually advanced last night for the first time in seven days.
The move overnight was largely due to the result of the FOMC minutes released yesterday, which showed that some policy makers said further monetary easing may be required should the economy lose momentum. The suggestion of further quantitative easing by the FOMC saw the Dollar weaken from a four month high against the Euro.
Euro / US Dollar
There were further fears surrounding the Greek situation yesterday and continuing speculation over the threat of a Euro-zone exit with confirmation that new elections will be held on 17th June. The ECB said it will temporarily stop lending to some Greek banks to limit its risk, as President Mario Draghi signaled the Central Bank won’t compromise on key principles to keep Greece in the Euro-zone.
There was also speculation that the ECB was looking to hold an emergency meeting and in this environment there will be wider fears surrounding the European financial sector and the contagion threat if there was a Greek exit. In the U.S, the latest housing data was stronger-than-expected with an increase in the number of new builds on the month to the highest level in three years.
Data Released Today
U.S 13:30 Weekly Jobless Claims (w/e 12th May)
U.S 15:00 Philly Fed Index (May)
U.S 15:00 Leading Indicators (April)
- The Pound remained largely unchanged against the Euro exchange rate
- The Pound remained largely unchanged against the Euro yesterday
- 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
- The Pound remained in the ascendancy against the Euro exchange rate