Sterling was undermined by comments from the Bank of England governor Mervyn King, who said “strong action” against inflation could destabilise the economy. Sterling continues to follow trends from events in the Eurozone as it reversed gains against the Euro following comments by ECB member, Axel Aeber who indicated that Europe’s rescue fund of 750 billion Euro’s could be increased if necessary.
Sentiment on the Euro remains week as it dropped to a fresh 2-month low against the US Dollar as heavier trading returns following the Thanksgiving holiday, the single currency hit $1.3279. With political tensions rising in Dublin, holders of Irish sovereign debt have been worried about the risk that the budget will not be passed next month, which would delay any bailout from international lenders. The risk of contagion in the Eurozone still persist as the yields on Spanish debt increased.
Bond markets were quiet yesterday due to the Thanksgiving holiday in the US which suppressed volumes and with an early close once again in the US today we can expect trading volumes to remain range bound until trade resumes on Monday. The US Dollar has been stronger across the board today with North Korean comments heightening tensions in Asia and leading to a flight to safety.
As the year end approaches the commodity backed currencies are vulnerable to a sell off as a prospective slowdown in the Chinese economy may lead to investors searching for the safe haven assets of the US Dollar, Swiss Franc and Japanese yen.
EURO/GBP – 1.1840
US$/GBP – 1.5695
CHF/GBP – 1.5711
CAN$/GBP – 1.5985
AUS$/GBP – 1.6254
ZAR/GBP – 11.1890
JPY/GBP – 131.44
HKD/GBP – 12.1722
NZD/GBP – 2.0842
SEK/GBP – 10.9850
US$/EURO – 1.3255
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