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Well it was always going to happen. Profit taking on the past days’ gains over asset classes that benefited from risk appetite saw GBP lose ground against the EUR and USD, stock markets fell, and government debt prices rose.

We were excited in the run up to the Services PMI figure as we hoped that the industry would be the first outside of Asia to expand. Although the release did print at 51.7 investor sentiment did not have the legs for another sterling forward fight and support for the pound evaporated. The data is still strong however and we believe is the first real green shoot and shows that the enormous policy stimulus that the government and the Bank of England have put into place is actually working. The worst thing they could do now however is ease off the accelerator; we’re getting to the required rev rate but not ready to dump the clutch and speed to recovery in a plume of tyre smoke but instead we would stall like a learner driver at a roundabout, undoing a lot of good work.

Risk is the name of the game at the moment as a failed Latvian debt auction brought back the fears over the eastern European banking system. Latvia wanted to raise just over $100m dollars through a treasury auction; they didn’t raise a penny. Not a sausage. Swedish banks, the main lenders to Baltic states, are taking a kicking as the devaluation of the lat now looks a certainty. Other eastern Europena currencies such as Romanian Leu, Croatian Kuna and the Estonian Kroon also fell against the dollar.

The dollar also strengthened in its own right as markets continued to back it as the global reserve currency. Earlier in the week both China and Russia spoke of the need for a new global reserve currency while Brazil have sided with them in the past. Overnight however Japan, South Korea and India all said that a move away from the dollar would be a serious error. Data from the US was mixed with ADP in particular hardening expectations of a steep fall in tomorrow’s Non-Farm reading.

With the Bank of England, ECB and Bank of Canada rate decisions today alongside initial jobless claims and EU retail sales it’ll be a busy day on FX markets with further sterling weakness against the USD likely. Euro could also fall against the dollar after the ECB decision.

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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..

To view any past or present currency blogs please click on the following link www.worldfirst.com/blog