The currency blog

Sterling has softened a touch this morning following ugly UK October Public Sector Net Borrowing data. The number has come in at £11.419 billion versus the forecast of £7.0 billion; this is the highest reading on record. For the UK we have also had retail sales data which posted a + 0.4% against the expectation of +0.5%. Although retail sales data was healthy enough, the fact that it was slightly below expectation has undermined sterling. The Public finance data certainly  undermined sterling and reaffirms the dire conditions in this regard. The pound has also come under a little pressure this morning with the papers touting that business leaders are not warming to the look of the new financial services legislation. With the recent rally on GBP/USD the snippets of negatives mentioned above has encouraged selling pressure on sterling so far today.

In other news the New Zealand Dollar fell more than most against the US dollar following the withdrawal of the opposition party’s support for the RBNZ’s policy of inflation rate targeting. This followed a damning report from the Treasury on the immediate future for the NZ economy. Risk trades have also lost appeal and this has led to weakness in the AUD and ZAR in addition to the NZD. The NZD is the biggest loser though falling over 1% as traders start to feel anxious due to the RBNZ’s policy and the dip in appetite for holding higher yielding/riskier assets. Still aside from economic doom and gloom the New Zealand has topped a poll as the least corrupt nation- I wonder how much they paid for this accolade…the poll measures 180 countries and we sit in seventeenth, two places ahead of the US…

Yesterday US CPI came in stronger than anticipated at 0.3%, however US housing starts fell a stark 10.6% in October. The stronger CPI was largely USD supportive; however the Fed were quick to note in a comment by Bullard that interest rates may not move until 2012.

Discuss on this on the Currency Exchange Forum