Daily currency report
Markets have reopened with the pound at eight-month lows against the euro as concerns about a weakening UK economy continue to loom large. The main focus, however, remains on the situation in the US. A new level of anxiety has been placed on traders after US Treasury Secretary Timothy Geithner said that the Government would run out of money unless Congress increases the debt ceiling. The US economy is preparing itself for significant spending cuts and tax increases if the Government cannot come together and negotiate a successful strategy forward.
With no local data on the agenda, UK investors will be hoping that the pound’s safe haven appeal increases as fiscal cliff negotiations in the US come to a head. Traders may already be looking towards PMI figures for further clues towards the current health of the UK economy.
US fiscal cliff negotiations are now well and truly under the spotlight with the December 31 deadline looming. Treasury Secretary Geithner upped the ante after stating the Government would run out of money unless Congress increases the debt ceiling. Consumer confidence data is due which may further reduce the greenback’s safe haven appeal if it comes in under expectations.
Markets reopen after the Christmas holiday; however, trading volumes are likely to remain low. We have sentiment surveys in Italy and France. France is expected to see consumer confidence holding steady, while Italian business confidence is forecast to increase slightly. The data is unlikely to have an impact on markets as traders will mostly focus on developments in the US.