Equity recovery sees sterling rise against euro and dollar
20/Jul/2011 • Currency Updates•
Sterling rallied against the dollar and euro during Tuesday trading, partially helped by a recovery in equities, although gains were capped as investor confidence remains low due to the UK’s exposure to Eurozone debt. Worries over the health of the UK banking sector remain, which could see sterling slide against the dollar due to its inherent safe haven appeal. The major focus in the UK today will be on the Bank of England minutes which are expected to add to the view that interest rates will remain at 0.5% for the foreseeable future. Additionally, any sentiment towards the possible implementation of further QE may dent the pound sharply.
The dollar managed to climb against the Swiss franc, pairing its losses against the euro on the rising hopes that Barack Obama and a group of senators named the ‘Gang of Six’ is closer to bringing the two warring parties together to hash out a deal in raising the US debt ceiling through cuts of almost $4 trillion over the next decade – a solution that will see a reduction in ‘Obamacare’ spending and increased tax revenue to the tune of $1 trillion.
The euro traded down against the pound and dollar as lingering doubts remain as to whether Thursday’s Eurozone summit will quell investors’ fears of contagion risks from Greece’s sovereign debt crisis. The euro remains vulnerable as there is an air of uncertainty regarding the details of a new aid package for Greece, which will be discussed on Thursday. Tuesday saw the result of the German ZEW index for July, which measures economic sentiment. July showed a marginal increase in ‘current conditions’, rising to 90.6 – the second highest level in a decade. However, the ‘forward – looking expectations’ balance declined to -15.1, which is the lowest level since January 2009.