Sterling moves higher once again

Claire Hogarth20/Jun/2014Currency Updates

GBP

Sterling broke fresh ground against the dollar yesterday, punching through previous records to reach new five year highs. Cable is now at the most elevated level since before the crash of late 2008. It also moved upwards against the euro.

Yesterday’s push was the result of continued negative dollar sentiment, as Janet Yellen’s words continue to trouble investors. Data from the UK itself was actually under expectation with retail sales disappointing at 3.9% YoY after 4.3% called. The expected monthly fall however was less pronounced than originally thought, and a negative reading was always expected after a bumper April.

Manufacturers enjoyed a stellar month, with orders up at the fastest pace in 6 months. Importantly, a large portion of demand came from within the UK, indicating an ongoing expansion in the domestic economy.

No data to look forward to today.

EUR

A mixed day for this single currency, inevitably losing ground on a dominant pound, but advancing against the dollar. It has reversed two weeks of losses against the dollar, although it is still around 3 cents off the highs we saw in April/May.

Ecofin – the panel of all EU finance ministers – meets today to discuss the budget for 2015. Last time out, the UK’s hard bargaining kept the budget the same, but with a multitude of stimulus packages expected to be announced it will be harder to keep it down this time.

A report done by the European Commission itself is expected to show another monthly rise in consumer confidence, to -6.6 in June. The index has been rising steadily over the past year.

USD

The dollar had a poor day against both pairs, reaching new lows on the pound and posting negative movement against the euro for the second day in a row, for the first time in 2 months.

The market impact of the Fed’s unexpectedly dovish stance has spilled over into a second day, piling pressure on the greenback.

The key phrase keep interest rates low for a ‘considerable time’ will likely reverberate around markets for days to come.

The same dovishness that cut the dollar had a buoyant effect on equity markets, with the S&P 500 moving to a fresh high of 1959, tantalisingly close to the golden 200 mark.

Initial and continuing jobless claims were positive, recording 312k and 2.516m, no data out today.

Elsewhere in the markets

The biggest movements came from Norway, where the Krone fell more than two percent after the central bank revised its economic growth forecasts sharply down, all but completely ruling out an interest rate rise in the medium term, and possibly warranting an actual cut in the rate. It currently stands at 1.5%.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.