Markets await BoE quarterly inflation report with US trade balance to follow
10/Nov/2010 • Currency Updates•
The pound rallied to its highest level in six weeks against the euro during Tuesday trading as peripheral debt concerns dogged the common currency. However, the pound found its progress capped ahead of Wednesday’s Bank of England inflation report.
Analysts suspect the British pound may decline before the Bank of England publishes its quarterly inflation report on Wednesday as weaker-than-forecast housing data on Tuesday has highlighted risks to future growth.
The number of real-estate agents and surveyors saying house prices fellexceeded those reporting gains by 49 percentage points, compared with minus 36 points in September, the Royal Institution of Chartered Surveyors said on Tuesday.
The euro lost ground against its most traded counterparts on Tuesday following renewed concerns over peripheral nation sovereign debt issues diminishing appetite for riskier assets.
The euro struggled as worries about a political impasse in Dublin before an important budget vote prompted selling in Irish government debt and expanded the yield spread between 10-year Irish and German bonds to its widest ever. Portuguese bond yield spreads over German benchmarks also hit new highs on Tuesday.
The dollar rose against the pound and euro, rapidly gaining midafternoon as concerns about Portugal’s ability to finance itself increased and falling equities reduced investors’ willingness to stay in riskier assets.
Rising US bond yields also contributed in helping the greenback to rally strongly on Tuesday, with the US 30-year Treasury bond yield rising above its 200-day moving average of 4.20 percent for the first time since May.
The dollar has rebounded this week after Friday’s surprisingly strong jobs data boosted confidence in the US economy and as traders refocused on budget and debt problems in some of the weaker Eurozone economies.