Better than expected consumer confidence figures from the EU and UK saw the euro and sterling both gain ground against the USD yesterday as risk appetite swelled investors’ desires.

On the day that Bernie Madoff, the owner of the largest Ponzi scheme in history, was sentenced to 150 years in jail it was somewhat ironic but also apt that the VIX index fell to its lowest level since pre-Lehman brothers. The IX index is colloquially known as the ‘fear index’ in so much that when volatility is high it rises; to have it the lowest it’s been in 9 months is a good sign for risky assets, GBP included.

Risky assets were also given a shot in the arm by Goldman Sachs who published a sector review on UK financial shares with a particular focus on Lloyds TSB. Goldman upgraded Lloyds to ‘conviction buy’ while also speculating on the possibility of a new ‘bad bank’ scheme for toxic debt here in the UK.

Overnight GBP has managed to climb to a new year’s high against the dollar of 1.6740 and is putting pressure on the euro too with an overnight peak of 1.1834.

This strong push by GBP could falter by 09.30 however as the details of our QoQ GDP figure for Q1 is published; if released alongside a worse than expected current account figure then GBP will likely take a dip. EU CPI at 10.00 is forecast to be negative, adding to deflationary pressures while data from the US this afternoon could stoke the fires of a risk appetite recovery.

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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.