Sterling picks up where it left off on an otherwise quiet day

Tom Tong27/Mar/2014Currency Updates

GBP

Sterling continued its upward trend yesterday, steadily gaining against both the dollar and the euro in the region of 0.5% on both. At this rate it will soon be knocking around at yearly highs once again.

Markets are likely to still be in the process of pricing in yesterday’s inflation figures, whilst an agreement between the UK and China regarding offshore renminbi exposure will have added support to the pound as well.

London is set to cement its place as the European trading hub for the Chinese currency, after China’s central bank and the BoE agreed to create a clearing bank specifically for offshore renminbi, a move which will ease the burden on businesses using the currency by providing direct liquidity.

The only data out today is retail sales for February.

EUR

With no real action from the continent yesterday the euro fell foul to sterling’s dominance, peddling backwards throughout the session. Trading against the dollar was flat.

The single currency is perhaps the most vulnerable of the G3 to investors’ fickle nature; markets seem to need constant reassurance of the Eurozone’s continuing economic recovery, without which they begin to sell off at seemingly short notice.

Italian consumer confidence provided some positive news for the EU, increasing 4 basis points from February’s reading, to 101.7. Retail sales however were flat MoM in January, and decreased by 0.9% YoY.

Data today includes measures of money supply and private loans across the EU.

USD

Volatility was conspicuous in its absence across US markets yesterday, with the only movement due almost completely to fires outside the country. The dollar, much like the euro, had nothing to defend itself with against a confident pound, consequently losing almost a cent over the day.

Yesterday saw very positive durable goods orders for February, which jumped to 2.2%, up 1.2% from expectations and 3.5% from January. Markit’s services PMI also came in above expectation at 55.5 in January, up 2.2 points from February.

Yesterday saw the worst performing IPO on the NYSE this year. The first stock offering of app-based gaming company King Entertainment, developers of the popular Candy Crush Saga, saw it crash 15% from its initial strike price of $22.50 to under $19. Investors cited the companies over reliance on its flagship game, which accounted for 75% of its revenue in 2013.

The poor performance also hit other gaming stocks, causing the S&P to falter after an initially good early session just short of record highs. Markets were also slightly put off by Barack Obama’s afternoon speech, which threatened increasing economic sanctions against Russia.

Data to watch for today includes consumption expenditures, annualized GDP, home sales and this week’s continuing and initial jobless claims.

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Written by Tom Tong

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