Volatility Likely Amid Investor Caution

11 September, 2012

Graham Harborne

The pound hit a 4 month peak against the greenback and remained range bound against the euro having lost nearly 1% at the end of last week.

The pound reacted positively against the dollar as risk aversion kicked in with the bond buying announcement seen as potential start to the long road of recovery within the eurozone. The main winner has been the euro but there is still doubt as to how the bond buying plan will actually work and with eurozone data continuing to be poor there is room for a further rate cut by the ECB later this year so it will be interesting to see if the euro can sustain its recent strength. UK data on the other hand has been surprisingly good of late and it seems unlikely that the BoE will make any adjustments to their current policy.

There is a raft of data out throughout the week and it will be interesting to see how the markets react. Will the FED do more QE? Will UK data releases continue to be positive? Can the euro continue to strengthen? If we knew the answers to these questions it would be easy but do keep in touch with your account manager at Currency Index as we are likely to see a volatile week.