The Pound grew by around 0.5 cents against the Euro yesterday morning in reaction to an unexpectedly weak set of German economic sentiment figures.
• UK government plan new bank – designed to help lending to small firms.
• German IFO’s drop – Business Climate falls to 2.5yr low.
• IMF downgrades likely – global growth down on ‘uncertainty’.
• Spain conundrum continues – to bailout or not to bailout?
Yesterday the government announced a proposal to create a new state-backed business bank designed to help liquidity flows throughout the economy. The new bank, complete with clean balance sheets, will be allocated £1 billion of government money with the hope that private capital support could help it lend up to £10 billion to small businesses. Business Secretary Vince Cable cites “manufacturers, exporters, and high-growth companies that power our economy,” as the primary target area for the proposed new lender. Although the bank would not have an immediate effect, 12-18 months down the line it could help foster growth in the UK economy, which would subsequently support the Pound in the long run.
The Pound grew by around 0.5 cents against the Euro yesterday morning in reaction to an unexpectedly weak set of German economic sentiment figures. German IFO for Business Climate in September slumped to a 2.5-year low of 101.4, German IFO for Current Assessment slid from 111.1 to 110.3, and German IFO for Expectations declined to a 40-month low of 93.2. The poor German results suggest that business confidence has not picked up as anticipated on the news of Mario Draghi’s unlimited short-term bond-buying programme. Sterling reached a fortnightly high of 1.2570 upon the release, before consolidating just below 1.2550 for the day.
The Pound declined by a mild 0.2 cents against the US Dollar yesterday on a day that heralded former Greek Prime Minister George Papandreou’s first lecture as a “fall fellow” at Harvard University in the USA. Although Papandreou was forced to step down as a direct consequence of his inability to stem the Eurozone debt crisis in Greece, his subject: “The Crisis in Greece and Europe, Systematic Weaknesses in the Eurozone and Institutionalised Shortfalls in the European Union,” has attracted lots of attention and is already oversubscribed.
Global risk appetite was slightly damaged by a speech from IMF Managing Director Christine Lagarde who said that their global growth forecasts are likely to be cut at their annual meeting in Tokyo due to uncertainty surrounding policymakers’ ability to pull through on promises.
In response to the 5th consecutive month of decline in the German IFO survey of business sentiment, the risk-sensitive Canadian Dollar declined by around 0.4 cents against the Pound to an 80-day low. However GBP/CAD was not able to sustain itself above the 1.5900 mark for long and the pair settled at a very similar rate to its opening level.
Sterling almost penetrated the 1.5600 mark against the Australian Dollar yesterday as uncertainty over the situation in Spain, combined with the sustained descent of the German IFO figures sent the Pound higher by around half a cent. However, like the majority of yesterday’s attempted moves, Sterling’s surge lacked the necessary impetus and fizzled out by the end of the day.
New Zealand Dollar
The Pound appreciated by an impressive 1.1 cents against the New Zealand Dollar yesterday as risk appetite was betrayed by falling sentiment in the Eurozone’s most robust economy and global growth prospects were hampered by a pessimistic speech from IMF Managing Director Christine Lagarde.
Data Released Today
07:00 EUR German GfK Consumer Confidence Survey (OCT)
13:30 CAD Retail Sales (MoM) (JUL)
15:00 USD Consumer Confidence (SEP)
23:45 NZD Trade Balance (New Zealand dollars) (AUG)
- Pound to Euro, US Dollar exchange rate: The Pound grew by around half a cent against the Euro
- Pound to Euro, US Dollar exchange rate: The Euro managed to appreciate by around 0.4 cents against the Pound
- Pound to Euro, US Dollar exchange rate: The Euro declined against Sterling by around 0.7 cents
- Pound to Euro, US Dollar exchange rate: The Pound declined by around 0.5 cents against the Euro
- Pound to Euro, US Dollar exchange rate: The Pound declined by around 0.8 cents against the Euro