The Euro remained relatively unchanged against the Dollar in early trading yesterday and challenged resistance levels above the 1.32 level before losing momentum.
by Adam Solomon
Sterling / Euro and US Dollar exchange rates
The Pound rose to the highest level against the U.S Dollar in almost three months, peaking at a high just under 1.58 yesterday, while the UK currency also continued to edge higher versus the Euro exchange rate. European leaders are moving closer towards resolving the sovereign debt crisis and this is dampening demand for the Dollar as a safe haven.
The Greek Prime Minister Lucas Papademos said that progress had been made in debt swap talks with the country’s bondholders, adding to optimism that a resolution isn’t far away. The Pound received a boost over-night, after a report showed that UK consumer confidence increased to the highest level in seven months in January.
The Gfk gauge of consumer sentiment climbed four points from December to minus 29, the highest reading since June and consumers’ outlook for the economy and their personal finances also improved. A separate report showed that UK mortgage approvals rose less than initial expectations in December and consumer credit fell by the most on record, indicating tighter credit conditions and a lack of activity in the housing sector.
Although the data is having a modest impact on the market, swings in risk sentiment is what’s really driving the rates at present and the Pound took advantage of the increase in global stocks to make strong gains versus the Dollar. European leaders agreed to accelerate the introduction of a permanent €500 billion rescue fund and signed a deficit control treaty.
There will also be additional pressure for the Bank of England to engage in quantitative easing with an announcement of an extension to the bond purchasing plan possibly in February. The current round of purchases ends next month and with the economy contracting and inflation slowing, policy makers may have all the impetus they need to implement further easing.
The focus this morning will fall on the latest manufacturing PMI for January and the report is expected to show modest growth in the sector at the start of the calendar year, following a contraction in December. A worse-than-expected result would certainly put the Pound on the back foot, as speculation over a technical recession would increase.
Euro / US Dollar exchange rates
The Euro exchange rate remained relatively unchanged against the Dollar in early trading yesterday and challenged resistance levels above the 1.32 level before losing momentum. German unemployment data was better-than-expected with a decline of over 30,000 for December. However, French and German consumer spending declined, while the jobless rate in Italy also increased.
Following Papademos’s comments yesterday, there was no Greek deal with private creditors and there was further pressure on the ECB to accept losses on its Greek bond holdings, which unsettled confidence and weakened the Euro. EU leaders are now looking for a deal on Greece by the beginning of next week with continuing delays undermining sentiment.
Portuguese bond yields also rose to fresh record highs, as the threat of a default continued to rise. The U.S data was generally worse-than-expected with a decline in consumer confidence for January. The Chicago PMI index also weakened on the month and the data only served to weaken risk appetite and supported the Dollar.
Today’s Exchange Rate Data
EU 08:58 – Markit Manufacturing PMI (January)
U.K 09:28 – CIPS Manufacturing PMI (January)
EU 10:00 – HICP Flash (January)
U.S 13:15 – ADP Employment (January)
U.S 15:00 – Construction Spending (December)
U.S 15:00 – ISM Manufacturing (January)
- The Pound Sterling strengthened to the highest level against the Euro exchange rate since March
- Pound Sterling, the Euro and US Dollar exchange rate news – The Pound rallied towards the highest level in six weeks against the Euro
- Pound Sterling, the Euro and US Dollar exchange rate News – The Pound fell from the highest level in two months against the US Dollar
- Pound Sterling, the Euro and US Dollar exchange rate News – The Pound rose 0.5% against the Euro
- Daily Foreign Currency Exchange Rate Forecast and News – Sterling rallied to the highest level against the U.S Dollar in 13-months