Yesterday saw a slight recovery for the pound against the Euro as investors off-loaded the single currency on speculation that Greece may have to restructure its debts – pushing it through the key support level of €1.1270.
With the lack of any significant economic data from the UK yesterday meant that Sterling was like a bag in the wind, being heavily influenced by the movements of other major currencies.
Peripheral euro zone bond yield spreads relative to German benchmark bunds rose as the market panicked over the possibility of Greece having to juggle its massive public debt.
Some analysts said the euro’s losses against the pound may be limited and the trump card from the European Central Bank is ready to be played again, with interest rates – or the hike thereof now a possibility next month following the 25 basis point rise in April.
Sterling rose more than half a percent against the dollar yesterday, peaking at $1.6385 before retracing a little by the close of play. A slight improvement in UK consumer confidence gave the support.
Shopper’s reluctance to spend is still affecting retailers, and this slight pickup in consumer sentiment is only a slight recovery from the record lows that were reported in March.
Sterling’s continued good showing versus the US Dollar could be set to continue as the Greenback traded near its lowest levels in 16 months versus a basket of currencies.
Expectations of ongoing, low US interest rates is supporting sterling, and is likely to continue in the month ahead. A test of $1.65 may now be an option.
Interest rates in the UK, and whether the Bank of England will adjust their stance will very much determine the medium term Sterling movement.
The governor of the Bank of Japan has provided a boosts in the outlook for the country by claiming that the economy will expand between July and September this year as the rebuild from the tsunami continues.
Masaaki Shirakawa claimed that Japan would not have trouble financing the reconstruction. Despite expected contraction between April and June, “Most private economists believe that Japan’s GDP growth rate will turn positive again in the third quarter of 2011 onward.”
A hesitant International Monetary Fund (IMF) downgraded its initial predictions for Japan’s economy saying that it expects moderate growth of 1.4% this year compared to earlier predictions of 1.6%.
It did, however raise its forecast for Japans growth in 20101 to 2.1% saying that it had confidence in Japan’s ability to recover.
A light day data wise from outside the US, with the only significant news coming from the States. US inflation and industrial production for March, as well as the Empire State and Michigan surveys for this month.