Daily Currency report
With just four days remaining until automatic tax increases and spending cuts are introduced in the US, confidence is stuttering as investors are starting to believe there is not enough time for Congress to strike a deal before the deadline. Market confidence also dipped as a result of poor consumer confidence data released in the States. The US dollar’s safe haven appeal increased as a result, leaving markets in an anxious mood. The pound failed to benefit from events and fell against most majors.
Sterling remains near eight-month lows against the euro, but near 20-month highs against the yen. There is no local data and UK markets remain relatively quiet headed into the weekend. Any influence in the sterling crosses is likely to come from developments in the US fiscal cliff negotiations.
Fiscal cliff negotiations continue with Obama reportedly cutting his holiday short to return to the States. Senate majority leader Harry Reid said that, given the time left, he does not see how a deal can be worked out to prevent the automatic spending cuts and tax increases scheduled to take place on January 1. In a market with a lack of liquidity, further similar comments may cause volatility moving into the weekend.
The euro had a mixed bag of results, with an initial surge against the dollar, however this was quickly curtailed at 3pm when US senator Harry Reid stated in this opening speech that “time was running out” to avoid the fiscal cliff and the US economy appeared to be “heading over” the edge in regards to the inability to agree on tax hikes and spending cuts. The euro was sold off sharply following the announcements, however it soon rebounded and continued its recent trend of strength against the pound.