The Pound declined against the Euro and the Dollar as British GDP contracted 0.5%. While nothing is definite, investors are far more confident in the outlook for monetary policy from both the ECB and Fed than they are from the BoE. With such uncertainty over both the direction of the British economy and monetary policy, sterling will struggle to maintain its recent levels.
The Dollar made gains against the Pound and the Euro yesterday despite disappointing economic reports. Investors’ appear to have a modest appetite for riskier assets this morning.
Investors currently do not see the limited disruption in oil supply as a major concern for the global economy; politicians are worried that US involvement in Libya could spiral into a longer term and far more costly operation than most are willing to stomach. With the current stop-gap bill extending the government’s budget deadline soon expiring, expect debate over the US’s involvement in Libya to come to the forefront in the coming days.
The S&P Case Shiller Home Price Index was released slightly better than expected, but the measure still dropped by the most since December 2009. A separate report showed that consumer confidence dropped in March to 63.4, down from last month’s 72 and short of the expected reading of 65. This Friday’s Non Farm Payrolls report will be closely watched by global markets as investors gauge the health of the US economy.
The Euro made gains against the Pound while declining against the Dollar following a further downgrade in Greece’s credit rating. S&P knocked the rating on Greek sovereign debt down two steps to BB- and kept a negative outlook. However, after rapid fire downgrades from all three of the major credit ratings agencies, investors appear to be largely immune to the news at this point. The Euro does however continue to struggle to sustain any significant gains after failing to break key support over 1.43 late last week. For the time being, the common currency will remain within its recent ranges as investors await the ECB’s April 7th monetary policy meeting.
Data released 30.03.2011
EU 10.00 Business Climate Index (March)
EU 10.00 Economic Sentiment (March)
Industrial / Services / Consumer
UK 11.00 CBI Distributive Trades Balance (March)
US 13.15 ADP Employment (March)