Quiet day on the currency markets
10 July, 2012
Yesterday was a relatively quiet day in the markets with no UK data releases yet we did see the pound continue to hold firm against the euro. As investors continued to remain sceptical about the eurozone debt crisis the pound continued to be bought reaching highs not seen since October 2008, against the dollar the pound remained range bound following last week’s weak US Non-Farm payroll data.
We must not however be fooled into thinking that this is the start of a resurgent pound. All eyes will be on key manufacturing data out this morning which is likely to weigh on sterling and let’s not forget that last week the BoE injected a further £50 Billion into their quantitative easing programme which is usually seen as very negative for the pound. It will be interesting to see if the Fed minutes, released on Wednesday, give any clue to the US following the UK with further QE but the big question is what if any affect will this have on the markets.
For now it seems fairly clear that the markets are being dictated by the eurozone crisis and with Spanish yields rising above 7% (a level that is seen as being unsustainable) there could well be room for further euro weakness. On the other hand last night saw eurozone ministers agree to give Spain an extra year to cut their budget deficit and also agreed to lend them €30 Billion this month to help their troubled banking sector.
It is anybody’s guess as to how successful this latest move will be but for sure when the market makes up its mind there will be strong fluctuations so by speaking to your Currency Index account manager you can ensure you are kept up to date with any sudden movements.
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