YB Currency Update – Monday 14th September

YB Currency Update – Monday 14th September

Last week was a good one for markets in general, and for pretty much every currency, except of course for the Dollar. The week started with the G20 meeting of finance ministers committing to keep the fiscal stimulus going, with many warnings about the chance of a double dip recession, and coupled with signs of improving economic data from various economies, equities have risen;The FTSE finished the week above 5000, while the S&P500 rose 2.6%, and the Nikkei 2.5%. The rising equity markets fed through to currencies, and some of the higher yielding ones benefited, especially against the Dollar which was/is facing it's own pressures, as fears of coming inflation have led to further talk of countries diversifying their reserves out of Dollars, which has also led to Gold, as an inflation proof investment, rising once against above $100/oz. The Pound struggled to benefit from the global picture in the early part of the week as traders were wary over the prospects of the MPC announcement on Thursday, but as there was no news on an extension of QE, or on cutting the BoE deposit rates, the Pound joined the party rising to almost 1.67 against the Dollar and above 1.1450 against the single currency.

So that's last week rounded up, over this morning's trading Sterling has fallen back, as Asian stock markets have fallen in this weeks opening trading. The falls are most likely due to profit taking from last week's strong moves, and there is a feeling that the markets have risen ahead of the actual data on the economy, with the talk of mergers helping last weeks rallies. The Pound has now dipped back below 1.66 against the Dollar, and below 1.14 against the Euro. The Pound has also dropped back over half a cent against the AUD to just under 1.9350, which is still quite a bit higher than the beginning of last week when it seemed the rate would be testing 1.90; the AUD has been benefiting from some good economic news up to last week, and it seems that it may have got ahead of it's self as bad retail and employment figures have given it a knock, although it is still one of the best performing developed nations.

It's a quiet start to the week, with the UK having to wait to tomorrow's CPI release for anything to get it's teeth into, so it will be the Eurozone industrial production, and employment figures which will be focused upon. Manufacturing comprises a larger part of the Eurozone economy than it does in the UK, so their figures are more important, and give a hint at what Q3 growth will be, in which case the 0.4% drop expected is a little disappointing. The employment data is expected to fall slightly, as the nature of the major European countries welfare systems, give more support to recently laid of workers, which won't stop the peak of unemployment, but will means that it rises more slowly.  With equity markets struggling this morning the Pound is likely to be on the back foot going into Tomorrow's inflation release.

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