The pound continues to fall against the euro as the euro was boosted by another successful bond auction in Portugal and the continuing deterioration in every area of the UK economy other than the manufacturing sector.
Employers’ organisation the CBI’s reported in their January Quarterly Industrial Trends Survey that optimism amongst UK manufacturers picked up over the past three months with production also expected to rise this quarter, though rising prices are causing concern. It found 32% of firms increased output over the past three months, while 16% said that it had fallen, giving a balance of 16%, compared with a balance of 9% in October.
The euro also received support from some reports about partial debt write-offs and that Spain is finalising plans for a second round of cash injections for its troubled regional banks, the Cajas.
Today’s release of German IFO data could well give the euro a further boost as a positive number is expected.
The pound could be set for further falls against the euro with the publication today of UK retail sales figures for December. With the cold weather last month and some disappointing retailer’s updates, expectations aren’t particularly high among some analysts, with a best case scenario being for a flat month, while others are looking for a decline of around 0.2%.
The US dollar was boosted by better than expected US weekly jobless claims with the rebound particularly acute against the yen and high yielding, commodity driven currencies like the Australian and Canadian dollars as commodity prices sank for a second day yesterday. US government figures showed the number of Americans making their first unemployment claim fell to 404,000 last week from 441,000 the time before. Analysts were looking for a drop to 420,000. Continuing claims declined to 3.86m from 3.89m compared with predictions of an increase to 3.96m.
Meanwhile, sales of existing US homes rose 12% in December, taking the annual sales rate to 5.28m homes, the highest since May 2010.
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.”
