Sterling Suffers Following Poor UK Retail Sales Figures (Matthew Vassallo)

GBP EUR Looks to Employment Figures for Support

Its been a busy day on the currency markets following yesterdays announcement by the US Federal Reserve that they had decided to keep their monetary stimulus programme on hold, despite wide spread reports to the contrary. It had been widely anticipated that the FED would slowdown or ‘taper’ their Quantitative Easing programme and it would seem the markets had anticipated such a move. The USD quickly lost ground against all the major currencies, in particular GBP, where the Pound surged over two cents to a high of 1.6162.

Questions are now going to be asked over the relative health of the US economy if the FED felt the need to keep the current levels of monetary injection on hold and indeed FED Chairman Ben Bernanke was far less upbeat about the US economy than he has been in recent months. There may be a sense of being able to walk before they can run, in which case the decision could have been made to ensure recent improvements in the economy continue but with such a widely anticipated outcome not coming to fruition, this decision is more than likely to cause market unrest over the coming days.

The Pound did run into trouble this morning however, following the release of UK Retail Sales figures. Figures came out much worse than expected and the Pound lost ground against the EUR (falling back into the 1.18’s) and the USD (falling back into the 1.60’s). This is a typical example of the continuing economic issues the UK economy will face and as I alluded to in my last post I would be wary of assuming GBP/EUR rates would just continue on an upward curve through 1.20.

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