The currency blog

Yesterday the pound started the trading year very positive, however later in trading and in trading thus far today it has been sold. Despite good economic data yesterday from the UK in the form of UK Manufacturing, mortgage approvals and mortgage lending the rally could not be sustained. The reason for the slump is attributed to an article in the Telegraph which quoted US investment group PIMCO as stating that it will not be a buyer of Gilts in 2010 given the huge supply in the market. This is bad news for the Treasury as one of the largest investors spurs their appetite and turns into a seller. The pound gave up all of its gains against the USD and the EUR and slumped lower hitting 1.60 on the USD and 1.11 on the euro- this again reinforces that the markets remain volatile and unsteady going into 2010.

Other noteworthy news came from the US where Fed representative Elizabeth Duke reiterated the stance that the Fed are to leave interest rates low for a prolonged period. Recently sentiment was swinging towards a possible hike in rates- possibly as early as April. These comments could lead the USD back into a bearish mode especially against the commodity currencies.

This week we have the Bank of England meeting on Thursday which is not expected to throw any curve balls into the current status. The big number this week is non-farm payroll data this Friday from the US.

Discuss on this on the Currency Exchange Forum