Investors hold their breath as volatility returns to forex markets

Tom Tong12/Nov/2010Currency Updates

GBP

Sterling was buoyed as the UK economy received another double-dose of good news. Fears concerning inflationary performance – potentially affecting the Q1 interest rate decision – were quashed along with further news negating QE2, leading the pound to rally strongly vs the euro, regaining significant ground towards its current value.

All eyes today will be on Germany as Eurozone Q3 GDP figures are announced at 10.00 GMT. With poor results expected, sterling investors will be holding their breath as they hope to capitalise on further gains today.

EUR

The euro lost ground against all main currencies yesterday as a double whammy of good economic news broke for its counterparts and poor GDP expectations for the Eurozone were factored in to the market ahead of today’s announcement at 10.00. The modest growth of 1% seen in Q2 is expected to be halved for the last quarter, raising fears that the Eurozone is not out of the woods yet. With the potential for further volatility today, the advice is clear to investors: fail to hedge at your own risk!

USD

The dollar strengthened against the pound during Asian trading, giving away most of the ground taken mid-week. This came on the back of positive sentiment over the global rebalancing of the global economy and exchange rate cooperation with China, coupled with further positive sentiment that the current weak dollar is to aid the US in reducing its trade deficit.

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Written by Tom Tong

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