The currency blog

Sterling continued its rally against the US dollar yesterday as a combination of mixed macroeconomic data from America and Traders covering short positions pushed the Pound over the 1.52 level. Business activity stateside saw larger than forecast declines; in New York the index worryingly dropped from 78.1 to 60.6 suggesting the impressive pace of economic expansion could be slowing. Although the upward revision of UK GDP from 0.3% to 0.4% was the catalyst of the current Sterling rally, private sector confidence remains weak, confirmed yesterday with the GfK survey down one point to -15. This, along with the continued spectre of a hung parliament and Friday’s expected strong Non-Farm Payroll numbers from the US means further moves on the upside remain unlikely.

Another day, another disappointing data release from the Eurozone. Data showed inflation running at an annualised pace of 1.5%. Coupled with the figures from earlier in the week of unemployment rising to 10%, the markets are expecting a continuation of loose monetary policy by the ECB to keep the economic recovery on track. Over in Ireland, the nationalised lender Anglo Irish announced full year losses of $12.7 Billion as the new bad bank set up by the Government also imposed large charges on loans assumed from other Irish Banks. Anglo have been singled out by the Governor of the Bank of Ireland as the main culprits in causing the Irish banking crisis in a national newspaper – quite a statement from such an important figure and clearly showing just how much contempt Anglo is held in.

Look out today for German retails sales, UK and Swiss purchasing managers index and US initial jobless claims as the key figures. Reduced liquidity in the run up to Easter Holidays may see some larger than average moves in less liquid pairs with London and European markets closed on Friday. Have a great Easter and see you next week.

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