The Pound declined against the Euro while making gains against the Dollar. The pound benefited from an increase in risk appetite while the Bank of England minutes suggested that risks are still keenly balanced towards the downside, however the ‘hold’ camp seemed to be more certain of its footing than it had been in previous meetings. The consensus from the policy makers is that a rate hike would still have an overly adverse effect on the average consumer compared to the little good it would do in controlling inflation. Demand data has shown that the people are keeping their hands in their pockets as they wait for austerity measures to bite. Inflation will continue to rise as well as long as problems in food and oil markets remain but given that wage price inflation was shown to be muted in last week’s unemployment numbers we do not expect a rate rise until at least August.
The Dollar declined against the Euro and the Pound as concern over U.S. debt problems, as well as fading speculation of the Federal Reserve taking an early exit from its loose monetary policy, prompted traders to snap up the euro and other risk-sensitive currencies.
The Euro made gains against the Pound and the Dollar extending gains on buoyant risk appetite in thin trade and as BoE minutes weighed on the Pound. The euro has breached the $1.46 level against the Dollar to hit levels not seen since December 2009, with some support also from yesterday’s well received Spanish bond auction
With investors getting ready for a long Easter weekend in Europe and the ongoing bets for ECB tightening the Euro did not seem so debt burdened for the market anymore.
Following a successful Treasury bills auction from Greece yesterday, Spain today found good demand on its bonds and sold 3.4 billion Euros for 10 and 13 year bonds according to the Bank of Spain compared to the Treasury set ceiling of 3.5 billion.
Data released 21.04.2011
UK 09.30 Retail Sales (March)
UK 09.30 PSNCR (to end Mar)
US 13.30 Weekly Jobless Claims (w/e 16th April)
US 15.00 Leading Indicator Index (March)
US 15.00 Philly Fed Index (April)