Currency report 021012

Yesterday saw the pound lose out against the euro for the first time in a week as a string of poor UK data weighed on GBP. Both manufacturing and housing data came out below the anticipated levels and this was also coupled with a mixture of eurozone data results which helped the 12 bloc currency recover from its sell off at the end of last week.

Against the dollar the pound recovered slightly as stock markets improved throughout the day leading to a ‘risk on’ feeling within the markets. Having said that by the close of business the euro had once again weakened across the board as an all too familiar ‘risk off’ tone set in during the US trading session.

At the moment we are seeing reasonably good data releases from the UK and many think that the recession is not actually as bad as first thought. The underlying fact however is that at the moment the currency markets are being driven by the troubles in the eurozone and in particular the issues surrounding Spain and Greece. Any negative reports are clearly affecting investor sentiment and therefore weakening the euro. It’s likely this will continue for the foreseeable future and it will be interesting to see if either the BoE decision or indeed the ECB decision (and perhaps more importantly the ECB press conference) will give us an insight to the next move within the currency markets on Thursday.