Pound under pressure against the euro again

The pound endured another difficult day yesterday as the market anticipated looser monetary policy in the UK, after the Bank of England said it was ready to take unconventional easing measures to revive the ailing economy. Risk aversion also kept sterling under pressure as equity markets around the world were sluggish following the disappointment over the vague nature of the US bailout.

In early trading today the pound is regaining some value as the FTSE 100 is up. Investors are also wary about opening up new short positions ahead of the G7 meeting starting today and the long weekend in the US.

Investors will be particularly interested in the eurozone’s GDP figures released this morning. Germany announced their GDP early this morning, which came in worse than expected at -2.1% (expected -1.8%). There are no major announcements due in the UK today.

Dollar strengthens against sterling

The dollar strengthened against the pound yesterday due to worries over the bleak global economic outlook, which resulted in a decrease in investors’ appetite for riskier currencies. There was mixed data released in the US yesterday, with the announcement that US retail sales were up by 1% in January while Labor Department data revealed the number of unemployment benefit claimants rose for the fourth week in a row, up to 4.81m in the week to 31 January from 4.8m the week before.

Investors are now waiting to find out the outcome of the US $789 billion stimulus plan, which is expected to be put to a vote in both the House and the Senate today. The pound remained weak against most of the major currencies following the Bank of England’s announcement that they may make use of quantitative easing in order to revive the economy.

There are no significant announcements taking place in the US or UK today.

Dollar strengthens over the euro

In Thursday's trading the dollar strengthened over the euro by 0.43 cents to close the day at 1.2859. Earlier in the session the euro did fall as low as 1.2725 when stocks fell and risk aversion saw the euro sold heavily as investors sought the safety of the dollar. However, it did manage to trim its losses by the close as American stocks rebounded and better than expected US retail sales data saw risk appetite return to the currency markets.

In today's trading the euro has continued to strengthen, reaching as high as 1.2940 on renewed risk appetite and therefore increased demand for the single currency. This is ahead of the announcement of eurozone GDP figures; Germany's have already been released and show that the eurozone's largest economy contracted 2.1% in the 4th quarter of 2008 and 1.7% during the year. In America the Reuters/Michigan Consumer Sentiment Index is announced this afternoon.

Aussie dollar trades mixed against sterling

The Australian dollar traded mixed against sterling yesterday, as rising risk aversion kept the dollar under pressure amid disappointment at the lack of details about the US bailout. Sterling remained limited after the Bank of England said it was ready to take unconventional monetary easing measures to revive the ailing economy. BoE Governor Mervyn King said the central bank would discuss the measure at its next rate-setting meeting in early March.

Kiwi dollars firms slightly against the pound

The New Zealand dollar firmed slightly in calmer trade yesterday, as investors awaited key local data and news on whether US lawmakers would finally pass a multi-billion dollar stimulus package. In local news overnight, New Zealand retail sales fell by 1%, although this did little to dent the kiwi dollar.