The pound received another boost yesterday following George Osborne’s upbeat comments about the UK economy.

Osborne stated that the economy was turning a corner and was in the early stages of recovery. He added that whilst risks still remain for the recovery; a continuation of the current deficit-reduction plan should counter these risks to growth. Overall the news was well received by the markets, with GBPUSD reaching a three month high.

The pound received another boost yesterday following George Osborne’s upbeat comments about the UK economy.

Osborne stated that the economy was turning a corner and was in the early stages of recovery. He added that whilst risks still remain for the recovery; a continuation of the current deficit-reduction plan should counter these risks to growth. Overall the news was well received by the markets, with GBPUSD reaching a three month high.

The pounds recent performance is a total contrast to its performance in the first three months of the year. In fact, over the last six months the pound has gained by 7.3%, the best performer amongst ten of the major currencies, when measured against a basket of currencies.

The US dollar weakened again yesterday as investors continued to digest last Friday’s disappointing job figures, with thoughts now that the Fed may be less aggressive to taper quantitative easing. A reduction of US$10bn worth of bond purchases is the current expectation ahead of next Wednesday’s monetary policy meeting.

The US dollar also weakened as demand for safe havens was dampened following a bid by Russia to get Syria to turn over its chemical weapons to international control; averting any potential threat of a US military strike.

Euro zone investor confidence hit a two year high yesterday, on the back of a more upbeat outlook for the euro economy, especially after data showed two weeks ago that the euro zone has indeed exited a recession. Further strength in the euro could be limited however ahead of next week’s general election in Germany.

The only other notable data came from Canada as the number of new permits for construction projects smashed expectations to show a rise of 20% in July. The Canadian dollar continued last Friday’s strength and traded higher against the pound.

We would risk appetite to be heightened today following better than expected industrial production and retail sales figures from China suggesting that the economy was recovering. As a result we are seeing commodity based currencies such as the Australian dollar on the front foot and regain ground after five months of depreciation.

With a quiet day on the fundamental data front, President Obama’s speech on military action on Syria will be in focus this evening, which we would expect to have some bearing on moves on the US dollar.

Key Announcements:

Nothing to note of today.