Daily currency report

Moody’s has downgraded the rating of 30 Spanish banks. The announcement comes after Portugal’s Parliament rejected its government’s austerity measures, which prompted the resignation of the Prime Minister. In the UK, sterling gave up some of its recent gains after the Bank of England minutes reflected very little change from the prior month’s decision.

Sterling

Sterling came off highs against the US dollar and euro after the Bank of England released minutes that showed policymakers voted 6-3 to leave interest rates on hold. The presentation of the UK budget went smoothly and offered no big surprises. The media have latched onto the fuel duty cut which should provide some help to consumers who have been crippled by higher energy prices.

US dollar

The US dollar has made gains, but the gains have been capped by rising oil prices and weak economic data. New home sales fell 16.9 per cent to record lows of 250k. Durable goods are seen weakening sharply from last month’s data that received a boost from aircraft orders. The orders number is traditionally volatile.

Euro

Portugal is close to rating downgrades, which brings the country close to requesting help from the bailout fund. Investors fear that once Portugal goes to the fund, Spain will be next, which is highlighted by Moody’s downgrade.

Japanese yen

The Japanese yen looks set to spend quite a long time trapped in tight trading ranges. Investors are avoiding trade in the currency for two reasons. First, there are increased uncertainties over the situation at the Fukushima nuclear plant and the amount of radiation it is admitting. Second, the yen is under the guard of the G7, who have agreed not to allow yen appreciation. Under such conditions economic data becomes secondary.

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