The British pound could use the UK Government borrowing figures and industrial data to help stop, or at least slow its dismal start to 2013 which comes amid growing worries about Britain’s economic outlook and EU referendum plans. Sterling sank to 10-month lows on a trade-weighted basis having dropped to new lows against both the US dollar and euro. The single currency bulldozed its way through key technical levels against the pound and may test 11-month highs after eurozone finance chiefs agreed to further aid for Greece, adding to optimism about the region’s 2013 government debt prospects.The Bank of Japan met widespread market speculation that the Japanese Government will become more involved in monetary policy. Alongside the Government, the BoJ announced a new two per cent inflation target and a US Federal Reserve-like unlimited quantitative easing plan. The euro may also find continued strength following important ZEW German sentiment data which is forecast to show business confidence in Europe’s powerhouse economy improving.
Sterling
Escalating worries about the health of the British economy and the Government’s EU referendum ideas pushed sterling deeper into negative territory. The pound opens just shy of five-month lows against the US dollar and 10-month lows on a trade-weighted basis. Analysts will examine the UK’s public borrowing accounts for December, with forecasts pointing towards a much-needed improvement in public finances. This could help lighten fears about Britain losing its prized AAA credit rating.
Euro
The euro is pressing higher after breaking key chart resistance levels to reach new 10-month highs against the British pound, with further gains possible after eurozone finance chiefs agreed to lend more money to Greece. Meeting, eurozone finance chiefs gave Athens the green light to receive its next slice of bailout cash, adding to hopes that the worst of the sovereign crisis is over.
Japanese yen
The yen climbed sharply after the Bank of Japan announced a US Federal Reserve-style open-ended stimulus plan, but said that the programme will not start until January 2014, which left many investors who had priced-in an immediate start to aggressive monetary easing somewhat frustrated. The BoJ concluded its two-day policy meeting with a joint statement with the Government, confirming speculation that the central bank will take on Government guidance towards monetary policy.