The euro strengthened yesterday away from 3 month lows against the dollar as Germany hinted to the market that they may step up and alleviate the pressure that has built up in Eastern European markets in recent days. This would take the form of financing a country which wasn’t able to meet its debt obligations. While this will strengthen euro in the short term we are still euro bears in stance.

The dollar was weak against sterling for the majority of yesterday as equity market recovery allowed risk appetite to increase with investors leaving safe-haven treasury bills to frolic in the more lucrative trading arenas. That was until the Philadelphia Fed announcement at 15.00. The monthly survey of manufacturing in the tri-state area of Pennsylvania, Delaware and New Jersey collapsed to -41.3 against a consensus view of -25. This alongside an unexpected jump in Producer Prices saw risk return swiftly to the market with stock markets paring gains and sterling slipping from its point of ascendency. The trend has continued overnight.

Retail sales from the UK are due today with a lower figure likely given the peril on the High St at the moment and we expect the reading to show that January’s 1.6% jump was an aberration. CPI is due from the US this afternoon and expectations have been revised upwards after yesterday’s higher PPI number. We now expect 0.4% against a previous figure of -0.7%.

Further analysis is of course always available at our video blog http://uk.youtube.com/user/WorldFirstJC

 Have a great weekend.

Please feel free to contact me (jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our: Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080. Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.

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