The pound continues to give up its recent gains as the August sell-off becomes a thing of the past and a measure of risk appetite comes into the market.
This week also sees the publication of a raft of UK data which given the state of the UK economy, is hardly likely to be pound supportive.
The Chartered Institute of Personnel and Development (CIPD) reported that the UK could see unemployment rising again in the third quarter of the year in a survey of over 1,000 employers. The data suggest that public sector cuts will outstrip jobs being created in the private sector.
More worryingly, long-term prospects are even worse with the twelve-month employment index falling to -6 from +2 last quarter.
The intentions of the SNB, Switzerland’s central bank continue to dominate the foreign exchange markets.
The Swiss franc again tumbled. There have been persistent rumours of a crisis meeting to be held in Switzerland about how to prevent the franc from becoming even stronger, with both the government and the Swiss National Bank concerned at Swiss companies becoming less competitive in the international markets as a result of the rising currency.
Speculation is rife that the government and central bank will set a lower limit for the euro-Swiss franc exchange rate.
Last week, investors, who in recent months have relied on the Swiss Franc as a safe bet, saw the currency drop around 7% against the euro and the dollar.
The Swiss franc has dropped significantly over the past three days, marking the biggest fall in the currency since its creation in 1999.
Later this morning sees the publication of inflation data from the UK which should again show the difficult position policymakers are in trying to steer a course between re-flating the prospects of the UK economy but keeping an eye on inflationary pressures.
The euro continues to strengthen on the back of bond buying by the ECB in support of indebted countries like Italy and Spain whilst some expect today’s Franco-German summit to begin to create a framework for euro zone bonds, the only short term solution likely to knock the euro zone sovereign debt crisis on the head.
Commentary by Tony Redondo
“Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.”
