Currency Update – Tuesday 12th May
The markets took a knock yesterday as reports in both the Wall Street Journal, and the Telegraph (enjoying a few days in the international limelight) both warned against overpriced stocks and being drawn into a ‘suckers rally’. The S&P500 fell 2.5%, and stocks elsewhere were hurt by bad trading news from HSBC. Stocks have risen by 30% since the start of March, and the small falls could be a little bit of profit taking, although whatever the reason it still weighed on the Pound which dipped against the Dollar down towards, 1.50 in yesterday’s trading and also fell below 1.11 against the single currency.
The Euro itself stayed strong in spite of industrial production figures falling by more than expected in both France and Italy; Trichet gave the currency some support by stating that he sees the recession as being near the ‘inflection point’ intimating that he thinks the worst may be over. This has kept the Euro up above 1.36 against the Dollar, and overnight news from the OECD. that several major economies may be emerging from the recession, may keep the single currency supported at this level.
There has also been some better news overnight for the UK economy with both the RICS housing survey, and the BRC retail survey proving surprisingly positive. The BRC survey showed retail sales 6.3% higher than the same period from one year ago, and while the timing of Easter and the better weather this year will have played a part in this, it seems that not even months of doom and gloom can keep the British out of the shops. The RICS survey showed an increase in interest of housing, and an increase in the number of respondents to the survey reporting an increase in house prices. Most respondents still reported low sales and falling prices, but the survey was still more positive than previous readings. The overnight positive data has given the Pound some support stopping the falling stock markets from dragging the Pound lower.
The overnight good news has continued into this morning as the industrial production figures for the UK have fallen less than expected. The figures show a 0.1% fall in March, but this still represents a record year on year fall. As recently it is the pace of the decline rather than the absolute numbers which are improving, and indicating that things may start to improve. The raft of improving figures has led to the Pound climbing again in this morning’s trading hitting 1.5250 against the Dollar, and climbing up over 1.1150 against the Euro. The looks to have regained the front foot, but of course there is always a nervous stock market, and tomorrow’s inflation report to knock it back.