POUND
Sterling is trading down by a quarter of one percent this morning against the Euro but has managed to stay flat vs. the USD. This comes after a worse than expected unemployment rate, increasing to 8.4% from 8.3% expected, although the increase in the number of people claiming unemployment benefits was only 1.2k against 9.1k expected. This data although mixed will do little to encourage investors to buy the pound with the UK economy clearly struggling and with lower inflation data out yesterday, sterling’s performance rests heavily on whether the BoE will start QE again next month. The situation in the euro zone looks set to continue helping sterling against the single currency in the short term.
EURO
The Euro has made gains against the pound and USD this morning with hopes that Greece and its creditors could avoid a costly default helping the single currency gain some support, as talks between the two sides resume. The Euro was also aided yesterday by surprisingly strong data for the German economy together with decent auction results from Spain and Belgium. This recovery for the euro however, may well be short lived with a senior official at one of the credit rating agencies warning that a double notch downgrade of Italy is a possibility.
US DOLLAR
The US economy is continuing to look more positive in recent times with better manufacturing data out yesterday helping the USD to maintain strength in addition to benefitting from ongoing risk aversion. The USD has lost some recent gains against the Euro although this has been down to some renewed strength in the single currency. Today sees the release of weekly retail sales data, PPI and capital flows all due this afternoon.
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