
Sterling posted a strong day on Tuesday as the dollar's dominance faded.
Sterling remains camped close to its strongest level in seventeen months against the euro to start Wednesday. At the same time, a less constructive environment for the US dollar saw the pound pick up close to a cent at its expense, while the euro was also able to regain some ground after a sticky period.
France was the catalyst for the recent euro weakness, so the sight of more stable government borrowing costs brough a little respite to the eurozone. However, the rapid swings in currencies and bonds in recent days suggests the present uncertainty isn’t going away any time soon.
Despite all the turmoil in bond markets, the S&P 500 hit a record high yesterday thanks to the overperformance of a handful of tech stocks. The lack of breadth (i.e. the concentration of the strong performance among only a few names) is causing some concern ahead of a busy corporate earnings season set to kick off in the next couple of weeks.
UK construction firms reported optimism for the year ahead in S&P’s monthly market survey. Although output fell in September, the below-neutral score of 46.1 marked the slowest pace of decline since January, even as new orders slowed and the impact of the Iran War continued to work its way through the sector.
Today’s big event will likely come after the markets have shut in Europe. The latest FOMC minutes from the Federal Reserve should provide another steer on the path for interest rates in the medium term, which could have a dramatic impact on the US dollar by the time Thursday morning roles around.
In other currency news, the Japanese yen is also under a little pressure this morning after a newly appointed board member at the Bank of Japan signalled his preference for a gradual approach to increasing interest rates. The Aussie dollar has traded more or less sideways against its rivals this week with more important data due out the other side of the weekend.
GBP: House prices stagnate
The average sale price of a home in the United Kingdom can in unchanged from the month prior in September. The latest data has also taken the annualised rate of price increases to 0% after a difficult year dogged by uncertainty around inflation and the wider economic landscape.GBP/USD: the past year
EUR: Contagion risk
The euro is still firmly under pressure as fears grow that fiscal trouble in France might soon spill over into other eurozone economies. Presidential frontrunner Marine Le Pen's promise to find €140bn in savings were she elected helped ease the pain for pummeled government bonds, but whether a nation currently gripped by sweeping student protests can stomach spending cuts remains to be seen.GBP/EUR: the past year
USD: Softer bonds puncture dollar
Yields on US government debt fell on Tuesday, easing a little pressure on finances but removing one of the dollar’s strong tailwinds. The US dollar weakened against the pound and even against the beleaguered euro ahead of FOMC minutes later this evening.USD/GBP: the past year
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