Daily Currency Report
Overview
Although the US current account deficit came in better than expected, it was still not enough to give the USD a boost. The UK saw some mixed data with average earnings up on expectations. However, wage growth without bonuses dropped from previous months.
GBP
The sterling recovered from an eight-month low against the euro and also ended slightly up against the US dollar as the currency market showed signs of stabilising following the recent sell-off of higher yielding assets. Sharp falls in equity markets during recent weeks combined with growing concerns about the state of the US economy have left investors reluctant to shoulder the risk of carry trades.
USD
The US current account deficit narrowed in Q4 to its lowest level in more than a year, while the annual gap hit a record for the fifth consecutive year according to the Commerce Department.
EUR
The euro has staged somewhat of a recovery against the pound in part due to the continued unwinding of carry trades. Propping up the euro's recent strength is the fact that the European Central Bank has been increasing the eurozone's interest rate in recent months, a sign, that the economy seems to be picking up.
JPY
The yen dropped against the USD as a rebound in global stock markets gave traders more confidence to buy higher yielding assets with funds borrowed in Japan. The yen weakened against 15 of the 16 most traded currencies as investors resumed so-called carry trades.