A Mixed Day For Sterling

30 November, 2012

Simon Eastman

Yesterday saw the pound on the whole do well against most major currencies although it wasn’t an easy ride. Early on the pound struggled as housing data came in lower than expected showing no change in house prices on a monthly basis and a larger drop than forecast over the year. This set a negative tone for the pound, whilst over in Germany better unemployment figures helped to reverse the gains made on Wednesday on sterling/euro trading pushing the pair to a near month low.

Business climate, consumer confidence and a range of economic sentiment releases from the EU also came in a little better than anticipated giving further fuel to the Euros rise, reaching fresh highs against the US dollar. In the UK, consumer credit and money supply figures didn’t help the ailing pound although mortgage approvals came in 1500 above the expectations helping to cap the losses against the single currency.

Other events causing the pound issues were rumours the UK will lose its AAA rating, Mervyn King’s speech where he stated the UK economy would be “exceptionally challenging” in 2013 and some trader reports that a few central banks were selling off sterling, buying Euro for month end reconciliations.

Despite all the above, the pound battled on helped along the way by the CBI distributive trades survey which came in way above the 18% forecast at 33%. This proved the turning point as the afternoon saw sterling gain across the board. Gains of one percent were made against the Norwegian, Danish and Swedish Krona while making over half a percent gain against the commodity led Aussie and Kiwi dollars and even gained half a cent back against the Euro. Cable was the only pairing not to make bigger gains, tempered by US new homes sales which showed a 5.2% increase over the expected 0.8% and quashing speculation over further US QE anytime soon.

So with month end today, are we in for a volatile day? The chances are looking likely, especially with a range of data out to help the ups and downs. German and Greek retail sales, Italian inflation figures, EU and Italian unemployment along with the Bundestag vote on Greek aid, which is bound to bring some volatility. Across the pond Canadian GDP and US inflation releases, whilst in the UK we have nothing at all, leaving the pound to battle without any ammunition at all.