Sterling slide continues as King pushes for more QE, whilst the pound hover near two and a half year low against the Dollar
21/Feb/2013 • Currency Updates•
Yesterday was a bad day for Sterling, with the Bank of England minutes showing a lack of consensus on decisions for further QE policy. With 6 of the MPC voting against further QE, and 3 voting for an additional £25bn, Mervyn King amongst them; this prompted a selling off from sterling investors sending the currency plummeting to a 15 month low against Euro, and is now teetering around 2 and a half year low against USD. With S&P’s triple A rating for the UK cast into further uncertainty.
With today set to be a relatively quiet day for Sterling, with the only notable data out being for “public sector net borrowing” for January. This is expected to be positive for sterling as things stand. With a small amount of volatility expected to rise from this data release. There is not much else endogenous to the UK that is likely to affect sterling today. (Other than a ten year bond auction).
The Euro continues to strengthen against sterling, with the volatility yesterday enhancing this rapidly. This will concern the ECB, who have exhibited worry over the fact that if the currency strengthens further, they will see export lead growth impacted detrimentally while the Euro continues this bullish trend.
Today sees the Markit manufacturing PMI data released for Germany and the Euro-zone. With the consensus being a value of 50.5 up from 49.8 for last month, this result will be seen as bullish for the Euro. With the rest of the PMI data in Europe set to follow Germany’s lead with an improvement on last month’s figures, the Euro is most likely to appreciate in markets today.
There will also be auctions of Spanish bonds for 2, 5, and 10 year, financing further fiscal stimulus in the country.
Yesterday saw the Dollar appreciate against both Sterling and Euro. Part of the appreciation due to positive PPI figures released, amongst other positive news showing strength in the U.S. In addition, overnight saw the FED’s minutes suggesting that QE3 could soon end. This prompted a sell-off in U.S stock markets, having that the committees asset purchasing could soon curtail, and lead to a further appreciation in the currency.
Today is a big day for dollar, as we look towards the CPI inflation data due out at 1:30pm, along with initial jobless claims data emerging from the U.S. With the consensus being that standard (MoM) CPI will be up from 0% to 0.1%, and (YoY) CPI should be down from 1.7 to 1.6%. Where Initial Jobless claims are set to rise, this is likely to lead to volatility in USD.