All Eyes on the U.S

13 December, 2012

Matthew Boyle

With many analysts predicting a poor outcome and as such bleak outlook for the U.S economy, the dollar fell against the pound to the lowest levels since February and was helped by a welcome reduction in UK unemployment figures – the largest seen in over a decade.
This boost to sterling combined with ongoing U.S fiscal problems helped the Euro extend its gains against the greenback early in the day to the highest levels seen in a week.

This trend continued following the meetings in the US as the Fed extended its bond buying programme and the FOMC announced no change to interest rates in the foreseeable future. Many analysts now feel that US financial recovery options are becoming increasingly limited, and as such are weighing on the dollar and continuing to de-base and weaken it.

This again was compounded as news broke of the ECB announcing new Eurozone banking rules – 200 of the biggest banks will now come under direct supervision of the ECB with it acting as chief supervisor. This was seen as a key step towards a banking union and is due to be put before the leaders later today when the ECB meet. News of this potential step only added to strengthen the Euro against both the Dollar and Sterling as it now seems the main focus of concern has heavily shifted from Europe to the U.S.

Take note as further swings may occur today as both the ECB December report is released , whilst we also await important U.S retail sales information. Both of which could have a significant effect on the particularly volatile mix of GBP/USD/EUR pairings during a time when these reports seem to be having an unusually increased effect on the markets.

If you have any transfers coming up, make sure you speak to your Currency Index broker to make sure you capitalise in these turbulent times.