With the crisis in Cyprus continuing to dampen confidence out of the euro zone, the euro came under further selling pressure amid renewed talk of a political stalemate in Italy.
Centre-left leader Pier Luigi Bersani ruled himself out from forming a coalition, stating that only an “insane” person would want to govern the country. The news weakened the euro 0.7% lower against the pound and 0.77% lower against the US dollar. Cypriot banks are scheduled to reopen today for the first time in two weeks today with new controls in place limiting withdrawals and bank transfers – the question is, will we see panic and anger amongst the Cypriot public?
Sterling’s gains against the euro yesterday were driven by events on the continent and demand for safety as the gains came in despite the fourth quarter GDP figures confirming a 0.3% contraction in the UK fourth quarter
The US dollar also prevailed yesterday as events in the euro zone and fears of contagion are causing investors to seek out safe havens, especially with the Easter bank holiday coming up.
Elsewhere, we saw a strong Canadian dollar following a rise of 1.2% from 0.5% in the Canadian inflation rate. The news may once again give a strong argument for the Bank of Canada to raise interest rates in Canada.
The euro has begun on the back foot this morning the change in the number of unemployed people in Germany rising to 13,000 well beyond market expectations. Although retail sales were better than expected in Germany, this figure seemed to be ignored by the market.
This morning, sterling has been spurred on as Gfk consumer confidence rose higher than expected and data also showed that the UK services sector grew at the strongest rate in 5 months easing concerns over the risk of a triple-dip recession – remember retail sales figures last week also showed a drastic improvement.
With two bank holidays ahead and a severe lack of confidence in the euro zone, it would not be a surprise to see further euro weakness and also demand for sterling on its relative status as a safe haven.
Our dealing desk will be closed for Good Friday and Bank Holiday Monday but of course the currency markets will still be open. Thus it is advisable to utilise Limit Order’s to automatically purchase your required currency should the rate get to a level you are looking for. Please call us on the number below for further information.
Have a great Easter weekend!
12.30pm – CAD – Gross Domestic Product (Jan): Expected to rise to 0.1%.
12.30pm – USD - Gross Domestic Product Annualised: Expected to fall to 0.4%.
12.30pm – USD – Initial Jobless Claims (Mar 24): Expected to rise to 340,000.