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Sat 23 Jan 2021 10:46GMT

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Sterling gains as euro weakens

Sterling hovered close to a two-month high versus the sick looking euro over night, with analysts now saying the trend has further to run as the single currency was hampered by fears that Ireland’s debt crisis may spread.

As previously suggested, Portugal and increasingly Spain were seen as potentially in need to help while Ireland’s belt-tightening plan has come under fire for sticking to economic growth assumptions that are said to overly optimistic.

Speaking about the out look on Sterling’s ongoing direction Kenneth Broux, Market Economist and Lloyds Banking Group commented: “Relative to the euro, sterling should still outperform from here”.

“But against the dollar it’s not quite so clear-cut. Long sterling positioning suggests the market could be overstretched and cable could play catch-up with €-$, “he added.

Sterling has slipped to a one month low versus the dollar in yesterdays trading session. The move down was driven by declining risk appetite which prompted safe-haven demand for the US Currency.

Indeed, this may continue to be the trend if fractions continue to show with North and South Korea. Generally the start of war or at the least un-rest between two countries that have butted heads in the past will lead investors to drag there money out of higher-yielding, more riskier currencies and retreat to the safe haven of the US Dollar and Japanese Yen.

Today sees Thanksgiving in the US which prompted mass buying of the US Dollar and Euro yesterday as trading is relatively thin during a market holiday.

This morning will focus on the Bank of England as the Governor Mervyn King testifies to the Parliament’s Treasury Select Committee on the November inflation report.

King will be flanked by other Monetary Policy Committee members Paul Tucker, Spencer Dale, Adam Posen and Andrew Sentance.

As a quick warning, it’s a fair assumption that whenever the Bank of England open their mouths it proves to be detrimental for the fortunes of sterling so we will keep a keen eye on this mornings outcome.

That said, if you have sterling and you are looking for Euros you will benefit from some fantastic prices currently, the US dollar is slipping away a little and caution is advised.