The pound rallied against the single currency yesterday due to a broad-based improvement in investors' appetite for perceived riskier assets on the back of stronger-than-expected service sector data across the globe. Indeed, PMI services data out of the UK rose to 42.5 in January from 40.2 the previous month, and higher than market forecasts of 40.4.
The euro's slide yesterday was accelerated after Fitch Ratings downgraded Russia's long-term foreign and local currency ratings to triple-B, sparking fears of a deep downturn in Eastern Europe. Capital outflows from Russia put pressure on the rouble, forcing Russian authorities to sell euros to maintain the balance of their euro-dollar currency basket.
The major news today will surround the interest rate decisions due from the Bank of England and European Central Bank. The market is anticipating a 0.5% cut from the BoE, whilst the ECB is expected to keep rates on hold at 2%. Any unexpected move from either central bank could lead to a weakening of the currencies.
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