Risk appetite was put aside yesterday following comments made by Senate Majority Leader Harry Reid, that going over the Fiscal Cliff “looks like where we’re going”.
Despite rising in yesterday’s early morning trade, sterling’s gains against the US dollar were erased following Harry Reid’s comments with the pound finishing lower on the day.
The euro continued to gain support following better than expected Consumer Confidence data from France and better than expected Business Confidence data from Italy with the pound once again closing lower on the day against the single area currency.
The pound generally had a poor day yesterday falling against the majority of its counterparts. Lower than expected BBA Mortgage Approvals data adds to the string of bad data that has come out from the UK over the last two weeks and exacerbates the problems faced by the current ailing economy.
With little data due for release today, the focus will turn to the US at 3pm Washington time, where President Obama will be meeting with congress leaders to discuss the details of the fiscal cliff. With no hint either way, the uncertainty over the outcome should provide the environment for further US dollar strength.
Given that we have seen 18 days of consecutive strength of the euro against the pound, we may see a technical retracement and see some gains for the pound today, with investors likely to book in profits before the year end. Euro sellers will do well to execute at current levels, given that the euro is an eight’ month high against the pound. Euro buyers should look at their requirements for early 2013 to hedge against any further falls, given the markets sentiment on the currency pair.
Key Announcements Today:
15.00pm – US – Pending Home Sales: Previous figure at 13.2%
20.00pm – US – Presidents Obama’s meeting with congress leaders to discuss the fiscal cliff