The pound reached a fresh 4 week high against both the US and Australian dollars but fell away against the euro yesterday.
UK data continues to disappoint with Britain’s goods trade deficit hitting a record high in November, suggesting that the recent surge in manufacturing exports may not be enough to prevent a sharp slowdown in 2011. Exports have been driven higher by a strong performance from Britain’s manufacturing sector. Manufacturing activity grew at its fastest pace since 1994 in December.
The British Chambers of Commerce (BCC) said yesterday that overall economic growth probably slowed down to 0.4%-0.5% in the three months to December 2010, from 0.7% in the three months to September 2010 due largely to the fragility of the services sector.
The British Retail Consortium (BRC) reported that shop price inflation edged up in December as retailers continued to battle against soaring global commodity prices. The BRC shop price index rose to 2.1% from 2% in November.
“Retailers are protecting British consumers from the full-force of global commodity cost increases, with unprecedented levels of discounting taking the sting out of grocery shopping,” said BRC director general Stephen Robertson.
The euro has continued to gain support after yesterday’s better than expected Portuguese bond auction saw yields come in much below the key 7% level which had precipitated bail outs for Greece and Ireland in 2010.
This was largely down to the European Central Banks (ECB) purchase of peripheral bonds earlier this week on the secondary market which has helped in bringing yields down and a public show of support for the euro zone from both China and Japan.
Good gains on Wall Street also boosted risk appetite with the Dow settling at a two year high.
Focus is now expected to shift to bond auctions in Spain and Italy and widely watched US retail sales and industrial production data.
Commentary by Tony Redondo, Senior Trader at Torfx.
“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.”
