Daily currency report
Overview
The euro’s recent rally continued, leaving the single currency on the front foot. Not only are traders jumping on speculation that the European Central Bank is prepared to intervene in bond markets, but further support was given by the Chinese Premier who reinforced his confidence in the euro area. However, losses were made after the Slovakian Prime Minister was quoted as saying he believes there is a 50-50 chance of a eurozone break-up in the near future. The pound took a minor hit after consumer confidence data failed to meet forecasts. Nationwide house prices also failed to inspire, however, attention is likely to fall on Ben Bernanke’s press conference. The spotlight is well and truly on the US dollar with investors eager to hear whether more monetary easing is on the cards via quantitative easing 3.
Sterling
After a promising start, sterling fell back and opens slightly down against the euro and US dollar. With central bankers due to speak at Jackson Hole, speculators may wish to hold off until Bank of England member, Adam Posen, gives his speech. Known as a dovish member of the Monetary Policy Committee, sterling may come under fire if the speech attacks growth forecasts in the UK. The pound did manage to hold on to gains against the euro as the Slovak PM stated the chances of a euro break-up are 50 per cent.
US dollar
The dollar rallied against most peers on caution ahead of a key speech by the Federal Reserve chairman in the mountains of Wyoming. A string of positive indicators on the US economy have reduced pressure on bankers to act to shore up growth. Data showed a steady level of unemployment claims while personal spending, the main driver of growth, increased the most in five months in July. Should the Fed chief stop short of signalling an imminent round of bond buying to lower long-term borrowing rates to spur faster spending, the dollar might be poised for a relief rally.
Euro
The euro managed to hold on to recent gains against sterling but slipped to the lower ranges against the US dollar. A well-subscribed bond auction in Italy helped with European sentiment. This was short- lived though as the Slovakian PM stated his belief the euro has a 50 per cent chance of survival. Focus will remain on Jackson Hole but speculators will be following Mario Draghi and the ECB closely over the coming weeks.