Sterling makes gains stick

Sterling has spent most of the day with minimal gains against the majority of its peers, solidifying gains made on Tuesday. Against the US dollar, GBP is a full percent higher.

Better than expected GDP figures on Tuesday sent the pound skyrocketing to post the biggest daily gains it has seen since May. Since then, we have not seen any great swings. It appears for now like the gains are here to stay as the pound posted a modest gain yesterday and looks like doing the same today. Sterling is currently trading up above the €1.1450 level despite yet more disappointing housing data from Nationwide this morning.

Earlier in the week the US dollar did dust off its armour and join sterling in the battle against the euro. However, the greenback has failed to hold its reclaimed territory and has been driven back. The looming QEII decision next week seems to be too much for the USD to counter. However, it’s looking increasingly unlikely that the euro hoards can keep up their pretence for too much longer as fresh concerns over Greece’s debt issues are starting to show yet again [bond spreads widening]. The question is not necessarily if the dollar will rise again, it is more a question of when?

Tom Hampton
Analyst – Caxton FX

US dollar loses ground to the euro

The US dollar slipped against the euro yesterday as investors sold the safe haven dollar on the back of a positive US housing report and action by the Federal Reserve aimed at underpinning liquidity amid the global financial crisis.

The National Association of Realtors struck an unexpected note of hope for the devastated US housing market, in a deepening slump since 2006. NAR reported pending home sales rose 6.3 percent in December, confounding most private economists' expectations of a flat reading. In addition, the Federal Reserve announced a six month extension of temporary programmes designed to inject liquidity into the financial markets.

Eurozone Retail Sales and PMI Services data is released this morning, while in the US employment data and MBA Mortgage Applications figures are released this afternoon.