Currency Update – Tuesday 17th March

Currency Update – Tuesday 17th March

Sterling tried hard, but couldn't sustain it's strong rally yesterday falling back, but still remaining higher than where it started, against the Dollar. The Pound had initially risen on the back of good stock market performance with Barclays following Citigroup, BoA, and JPMorgan, in announcing a good start to this year. Sterling did briefly climb above 1.42 against the Dollar, but as the US data came out, showing an even bigger dip in Industrial production than expected, then Sterling started to dip. This morning, with little data out to effect the Pound, it sits just above 1.40.

Gordon Brown has attempted to shift some of the weight of blame by accepting responsibility this morning for the credit crisis, although without actually apologising, something the newly incumbent US President doesn't have to do, but his administration is facing some approbation over the large bonus pool for AIG executives. AIG was bailed out by the government last year, and the press is less than impressed that tax payer money is being used for bonus payouts of a failing company, much like Fred Goodwin's ongoing pension fiasco in the UK, although not as farcical as the AIG execs are being paid to stay, not to go. The US government are, like the UK government, seeking redress through legal means, however unlike the UK government they haven't got cabinet members, like Harriet Harman, threatening to undermine the whole legal system.

The US stock markets closed slightly down after 4 straight days of rises, as American Express reported the number of people struggling with their credit card payments was up in February. This along with some trepidation over the FOMC meeting, which starts today and announces tomorrow, has reduced risk appetite, and kept the Pound lower. The Pound may not have risen much against the Euro yesterday, but what rises it did get has been given up falling back to around 1.08 against the Euro.

Tomorrow is the big day for UK releases, with today just the a house price measure released likely to contradict yesterday's rightmove survey and show house prices continuing to fall. In Europe the ZEW survey will be watched to see if the terrible manufacturing figures are impacting on industrialists outlook. In the US we have Producer Price Index and consumer confidence surveys, both of which are likely to be soft with producer prices falling, which could bring inflation down with it, and consumer confidence also likely to be weak.

The currency markets are expected to be calm today, with traders wary of any potential shocks from the FOMC announcement tomorrow, so Sterling may continue to stay weak, and tomorrow's MPC minutes and unemployment figures are unlikely to change things.

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