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FX markets were fairly mixed yesterday as a mixture of data and investor sentiment equally played their parts. Dollar strengthened to a one week high against the euro as investors reappraised the foundations of the recent ‘risky asset rally’.

Sterling lost ground against the majors in morning trade as markets still digested the gloomy assessment of the UK economy’s prospects made by the Bank of England on Wednesday. Analysts have cited the gloomy tone from Mervyn King as further proof that the pound will fall hard in the coming months as the reality of the UK’s current account deficit dawns on market participants. The recent tax changes made by the government are not attractive to international investors and with £220bn of gilts to fund these sterling bears believe that failed gilt auctions in the future will crush the pound’s recent rally.

A country with a completely different problem to us is Switzerland whose national bank once again reiterated their desire to see their currency weaken in a bid to stimulate the Swiss economy.

Data yesterday went with the form book as initial jobless claims rose by an unspectacular amount while PPI rose to 0.3% vs. 0.2% as an expected figure.

It is a much more important data day today. German GDP has already been released with Q1 falling by 3.9% vs. 3.0% expected and on a yearly figure a decline of -6.9%. GDP from Italy and the Eurozone as a whole are also due today and could see some euro weakness alongside CPI from the single currency area due at 10.00. US data due today includes CPI and Uni of Michigan Consumer Confidence.

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Please feel free to contact me jeremy.cook@worldfirst.com(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 on 020 7801 9050 or ourPrivate Client Currency Exchange 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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