UK suffers loss after good start to 2011
Big foreign exchange decision?
0% commission, no fees, get a free money transfer Quote
Eurozone sovereign debt continues to give markets cause for concern with confidence remaining shaky as the New Year begins to take shape.
The euro remains under pressure versus other majors, drifting lower against the US Dollar and Sterling through yesterday’s trading session and overnight. Falling to a low of $1.3127, with GBP-EUR rates peaking at 1.1853 already today, the single currency will be further hampered by the dollar having fresh evidence that the US economic recovery is gathering momentum.
Yesterday we saw better than expected non-manufacturing (services) ISM from last month, as well as a strong ADP employment report. The news of this near 300’000 gain in the private sector payroll last month bodes well for tomorrow’s release of the official non-farm payrolls report for December.
Indeed the dollar now has some reason to feel confident of making further gains if fundamentals over the next few days are supportive of the recovery. We may have an insight today about tomorrow’s non-farm report as the weekly jobless claims figures are announced.
A reduction in claims signifies lower unemployment which will strengthen the dollar.
Sterling continues to suffer from a mixed bag of trading sessions against both the dollar and euro as we suffered from the broad USD rally and benefitted from the break in euro sentiment.
As I write, the UK CIPS services PMI for December, which will be watched closely for an indication about the pace of recovery, has been released. The figure is worse than expected, 49.7 compared to 53 which is the worse figure since April 2009.
Pessimists now question whether another recession is possible as it will affect UK GDP by 0.3% and hinder growth on an already shaky economy massively.
More on this will follow as news unfolds.
The higher yielding currencies, New Zealand Dollar, Australian Dollar, South African Rand and Canadian Dollar are still out performing most major currencies as the risk sensitive basket swells once again. Sellers of these currencies are seeing some of the best rates in nearly 30 years versus the pound.