The Pound made gains against the Euro while declining against the Dollar. The Pound stayed within a 100 pip range against the Euro with the market able to stage a small rebound in the European session before falling back again during New York trading.

Investors are expected to look for outside factors to push the currency out of tight ranges amid the lack of domestic U.K. factors.

The Dollar made gains against the Euro and the Pound yesterday helped by strong commodity prices and the lack of investor risk-appetite that continues to push equity markets higher.

Also to note US Chicago Fed activity index fell back a touch to -0.46 in November from an upwardly revised -0.25 (-0.28 previously). The fall in the index was led by employment related components which contributed -0.16 to the total after a +1.0 contribution in October. The three-month average of the headline ticked up to -0.41 from -0.42 but remains well below the historic average.

The Euro declined against the Dollar and the Pound as Moody’s voiced concerns about Spain’s credit rating. It regained some composure overnight and in early morning on a round of short-covering, also aided by comments from China that it backed efforts by Europe to stabilise the global markets following the debt crisis, suggesting that it may up its share of Eurozone debt in its foreign reserves. Nonetheless, downside risks remain as markets continue to focus on Eurozone debt markets.

Data released 21.12.10

UK      09.30             Public Sector Net Borrowing (November)