Sterling continues slide against the euro
21/Oct/2010 • Currency Updates•
Sterling rose against the dollar on Wednesday as finance minister George Osborne outlined plans for UK public spending cuts, but it stayed weak against the euro hitting a six month low on Thursday morning after Bank of England minutes showed one vote for more quantitative easing.
Osborne announced plans to cut half a million jobs, slash the welfare state and raise the retirement age as part of an unprecedented cost-cutting drive to tackle the UK’s ballooning budget deficit. BoE minutes showed one policymaker, Adam Posen, argued for more quantitative easing this month, while another, Andrew Sentance, again called for a rate hike, while the rest voted for no change. Today sees the release of September’s retail sales figures at 09:30am, with an expected sales volume increase of 0.3% MoM.
The US dollar encountered its worst day in more than three months on Wednesday, reversing the previous session’s rally after an influential consultancy said the Federal Reserve plans to buy $500 billion of Treasuries over six months and leave itself room for more buying.
The dollar hit a 15-year low beneath 81 yen and the euro climbed near $1.40 as markets expect the Fed to start pumping money into the U.S. economy as soon as November, a policy known as “quantitative easing,” which has driven the dollar down since September.
The US dollar was able to pare back some losses from Wednesday throughout the Asian trading session, after US Treasury Secretary Timothy F. Geithner suggested he sees no need for further weakness in its currency. Geithner stated that the major world currencies were “roughly in alignment” and called on Group of 20 finance leaders to agree to “norms” on exchange rate policy
The euro reached a six month high against the pound on Thursday morning and rose against the US dollar as riskier assets benefited from uncertainty surrounding the imminent quantitative easing measures in the UK and US. Today’s focus in the Eurozone will be on the release of PMI Manufacturing data, coupled with the Consumer confidence survey released this afternoon.