Britain’s bigger-than-expected economic slump is still proving very difficult for investors to digest. Worries the Bank of England could restart money-printing or consider new methods of monetary easing sent the pound tumbling to 10-month lows against a basket of currencies.
Cable also fell to fresh five-month lows but may find support ahead of the Federal Reserve announcement in which chairman Ben Bernanke is likely to reaffirm that the Federal Reserve currently has no end date in mind for its stimulus programme.
The euro made additional progress against its major trading rivals and may be helped further along by encouraging German consumer confidence data. However, the euro could slip on Spanish GDP data if the numbers remind investors of Madrid’s still problematic debt levels.
Sterling
Britain’s bigger-than-expected economic decline last quarter is still proving very difficult for investors to digest. Worries that another year of unpredictable growth will force the Bank of England to launch new money-printing, or consider new methods of monetary easing, sent the pound tumbling to 10-month lows against a basket of currencies. Encouraging data from the US economy and Germany could possibly weigh further on the pound’s attractiveness as a safe haven.
US dollar
The US dollar did slip further against the euro, reaching new 11-month lows, following robust data on US durable goods orders for the month of December which beat market forecasts. The solid numbers gave investors more reason to feel confident about the global economy which took another slice out the greenback’s safe haven allure. However, the US dollar could recover some ground should US consumer confidence figures show individuals are feeling less secure given Barack Obama’s latest tax plans.
Euro
The euro moved through another area of typically sticky technical resistance to reach new 13-and-a-half-month highs against the in-trouble British pound, but the shape of its impressive rise could change after Spanish GDP data. Analysts expect Madrid to announce that its economy shrank a further 0.6 per cent in the three months to December, and has now been in decline since September 2011. The data could easily force investors to recheck their positions on how likely Madrid is to requesting a bailout which could undermine confidence in Europe’s government debt outlook.