Currency Update – Tuesday 14th April

Currency Update – Tuesday 14th April

The Easter break seems to have done Sterling some good, already on the rise last week, it has opened up higher this morning as the markets are starting to believe the worst could be over. There was some trepidation at the start of the month over the state of US corporate earnings in Q1, and although there is still no doubt some bad news waiting in the wings in the corporate reports, the banking part of it at least has been positive. Goldman Sachs have announced $1.8bn profits, and Citigroup's shares have jumped 25% in one day as the fears of nationalisation receded on better overall banking performance.

The rally of sentiment in the market has also been helped by good news out of China, as the Premier, Wen Jiabao, said there was 'better than expected' response to their stimulus plan in Q1. There is also the prospect of further stimulus plans in the coming months, and this has impacted commodity prices, with copper, rising 10%over the past week, reaching it's highest since last October, just before the Lehman brothers collapse. The Australian Dollar has benefitted from this commodity recovery and is at 6 month highs against the Dollar and the Euro, while also pushing the Pound down to below 2.05.

The Pound recovery has taken it to almost 1.12 against the Euro, and briefly above 1.49 against the Dollar. The Pound has spent most of February around or above 1.12 against the Euro, so March's dip may just have been an aberration, if the data out for the Euro later this week is as soft as expected then the Pounds recovery could accelerate.

The data released later this week that may help Sterling's recovery against the Euro is the Industrial production data, and Eurozone CPI, but today the focus is on the US with retail sales likely to show a small rise, and producer price inflation expected to continue to moderate. If the data continues to be supportive the Pound will continue to climb.

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