Sterling has seen some support following Wednesday’s budget and unemployment figures but struggled to breakthrough 1.20 and has fallen back towards 1.1950 today. This morning the pound found some support following Public Sector Net Borrowing figures that were not as high as forecast, however the Euro has gained this afternoon as Euro Zone consumer confidence figures were much stronger than predicted.
Recently the Euro has rallied against the pound moving in excess of 2% against sterling in the past couple of weeks. For me this is an opportunity for anyone selling Euros as I believe the ongoing deflationary pressures in Europe will keep the Euro in check. Should the levels of inflation stay at 0.8% and possibly move lower then the European Central bank may have no option but to cut interest rates and it is this that could keep the Euro in check.
Looking at the US dollar and the moves are still looking in favour of the greenback following Wednesday nights FED meeting in which new governor Janet Yellen indicated that interest rates could increase within 6 months, is this the start of a drive towards 1.60? Quite possibly in my view and more clues will be given next Thursday following the US GDP data release.
Finally the pound has had a torrid week against the Australian Dollar. Market sentiment reacted in a more positive way to the ongoing Crimea situation and also the softer data in China. The Aussie also found significant support following the release of the RBA minutes giving indications that interest rates are set to stay on hold for the rest of the year and that the central bank were becoming more comfortable with the current position of the dollar. Trends for GBP/AUD have been volatile to say the least shifting nearly 4% in the past month. Should you have a requirement with the AUD it is best to make your broker well aware of your position to take advantage of any spike in your favour as for me this yo yo effect is going to continue.
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