IFX Market Report - 16 December 2009
Yesterday saw Sterling show a variation of movement throughout the trading day, with a rise on the day against the Euro and a slight decline against the USD to a low of $1.6204. For expats in the eurozone relying on pension income from a UK pension or QROPS paid in sterling, this was a welcome gain.
Yesterdays Euro gains were briefly triggered as UK CPI inflation data saw a rise to 1.9%, the highest it has been in a year. Sterling’s Euro gains were further extended as more Euro Zone banking worries came to light. This time around saw the Austrian Bank Oesterreichische Volksbanken denying it was at risk of nationalisation, and that a report through the media of it being on a regulators watch list was untrue.
After this the Euro weakened briefly to a 2 month low to $1.4505 against the dollar, and sterling pushed to its highest against the Euro since November to €1.1196.
Sterling’s recent losses against the USD seem to be due to Euro Zone weakness in the banking sector, rather than day-to-day data releases. We have already seen Greece, credit rating downgraded to BBB+ with negative outlook, which has weighed on the Euro Zone as a whole. The main factors which will weigh on Sterling as an individual will be sovereign credit concerns, central bank "exit strategies" or renewed bouts of worry over the financial sector.
Sterling clawed back some ground against the dollar late in the European session after Bank of England policymaker Kate Barker was quoted as saying that concern over asset prices getting out of line was a key reason for caution about any future extension of quantitative easing, she also indicated she would be reluctant to extend the Bank's quantitative easing policy of buying gilts.
At 10.00am this morning the pound was at $1.6319, €1.1201, 12.10 ZAR, 146.44 JPY, 1.6960 CHF, 1.7300 CAD and AUD 1.8155. The euro had regained some of its losses against the US dollar, now at $1.4564.