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Foreign exchange specialists

Sterling holds onto gains

The pound has so far held onto yesterdays gains following the unexpected fall in the unemployment claimant count. The market welcomed the data along with the unanimous decision from the Bank of England to hold on QE. If you look at the employment numbers more closely the headline figure shrouds weak underlying trends in the labour market- however this was ignored for now by the markets and the news provided a rare opportunity to buy the pound. Already today we have seen the dreaded Public sector net borrowing data come and go without any nasty surprises- the data was actually better than expected with PSNB at 12.361 bln against the forecasted rise to 14.75 bln for February. In other data mortgage approvals for the UK sunk to 48k identifying further sluggish lending in the housing sector. The pound seems nicely consolidated above 1.52 and 1.11, however it is unlikely to see further big moves now until next weeks budget.

Equities have continued their good run with the Dow hitting a 17 month high and its seventh daily gain. The feedback from the Fed minutes reflecting that interest rates will remain low for a prolonged period has boosted the equity markets. Although confidence in equities is robust, there is still ongoing wranglings concerning Greece which is causing a few jitters. The Greek PM said that he may turn to the IMF for loan guarantees in order to lower its cost of borrowing in the credit markets. The difference between German and Greek rates is 300 basis points and this is hitting Greece hard, the argument is that intensive austerity measures are being swallowed by interest payments. The euro has lost a cent against the USD from yesterday.

In other news the Canadian dollar is still on its drive to parity against the USD and is currently within one cent of achieving this. The Canadian government are playing down the strength of the CAD for now but there must be a real concern for Canadian companies who rely on exporting. Although the Bank of Canada have repeatedly expressed concern in the past on the strength of the Cad the recent improvement in economic sentiment is unlikely to lead to any firm action or comments on the currency for now.