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Daily currency report

Overview

Sterling has found a bit of composure again after the Bank of England decided not to inflate its quantitative easing programme, sending the UK currency to six-week highs against the euro. However, the pound’s gains are likely to be limited before critical BoE quarterly inflation report. The euro spent a day fighting speculation about Greece again after European Central Bank President Mario Draghi warned markets there is little the central bank can now do to help solve the Greek crisis. The single currency has found some support though after the ECB kept interest rates unchanged following its policy meeting. The safe haven US dollar is still looking strong as investors continue to display a risk-averse approach to trading, as worries about the US ‘fiscal cliff’ mount, and talk of a ‘Grexit’ spreads. US President Barack Obama is expected to speak about the US economy and his comments could help sway market confidence. Sterling will face UK trade data before attention turns to the US session where stock prices will be a very interesting watch following some hefty declines.

Sterling

Cable may just have found a bottom to its latest slide and is attempting to bounce off two-week lows, after the Bank of England announced no changes to interest rates and the size of its money-printing scheme after concluding its November monetary policy meeting. Sterling also reached six-week highs against the euro and managed similar heights against the Swiss franc but is already facing question marks. Traders trying to take a strong view on sterling could be feeling very anxious about the BoE quarterly inflation and growth report.

US dollar

The safer US dollar maintained a strong position in currency markets as equity markets continued to sink amid concerns about an approaching ‘fiscal cliff’ for the re-elected US President, Barack Obama. However, Obama is expected to address those fears in a speech and should offer clues about what his deficit-cutting strategy will or could be. His comments may have a big impact on currency markets.

Euro

The euro has produced something of a recovery, moving off a six-week low against the pound, but remains battered by renewed speculation about Greece’s financial future. The single currency steadied after the European Central Bank held interest rates unchanged at 0.75 per cent, despite stronger signals of economic stress from Germany and unemployment across the region hitting another record high in September.

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