The currency blog

A very good morning for Sterling this morning as the pound hits a one month high against the euro to 1.1268 and it is also up to 1.5150 against the USD. The reason for the move higher has been attributed to the upward revision in 2009 Q4 GDP to 0.4% from 0.3%. However I feel there is a certain amount of profit taking after the dumping of sterling in the last few weeks- the FT highlighted that hedge funds were shorting sterling and we are now probably seeing profit taking from this leading to a squeeze higher.

The gains in Sterling come despite the fact that consumer confidence for the UK in March fell by one point to -15 after two consecutive months of improvement. The dip in confidence has been blamed on intense media focus on the state of the UK’s finances and the increasing likelihood of a minority government. Sterling will also have edged higher against the euro following data showing that Eurozone unemployment hit 10% in February- the highest since data started! More doom and gloom for the euro which is struggling to get above 1.35 and could face more downside pressure.

Nothing hugely relevant for the rest of the day- we have the Tankan survey on economic conditions in Japan released overnight- if the news is not positive from Japan we could see more selling pressure on the Yen which has started to unwind against most major currencies.

Discuss on this on the Currency Exchange Forum