The Pound made gains against the Euro while declining against the Dollar on concerns that the British economic recovery is stalling. The pound fell to a five-day low against the USD as investors bet that the Fed will raise rates before the BoE. After recent disappointing British retail sales data, it appears that the majority of BoE policymakers may be right in that the recent spike in inflation is only temporary.
The Dollar made gains against the Pound while declined against the Euro on Friday, The Dollar initially appreciated against the majority of its counterparts as the final reading of 2011 GDP showed that the economy grew at a slightly faster pace than expected in Q4, registering an annualized rate of 3.1%. However, a weaker than expected reading of both personal consumption and University of Michigan confidence has investors expecting that the Q1 ’11 results will not be quite as good. The Dollar has also benefitted on renewed worries over the nuclear disaster in Japan, and spreading political unrest in North Africa and Libya.
The Euro made gains against the Dollar and while declining against the Pound on renewed concerns over the Eurozone’s periphery economies. With Portugal moving closer to needing a “bailout”, much like the ones extended to Greece and Ireland last year, LCH Clearnet, Europe’s largest clearing house, announced that it would no longer accept Portuguese government bonds as collateral. Also disappointing investors, was the inability of Eurozone officials to come to agreement on the permanent expansion of the EFSF. In a somewhat foreboding statement following a two day summit, German Chancellor Angela Merkel said it would take the euro years to recover from the “sins of the past.” Nevertheless, most investors appear to still be expecting a hike in the ECB’s benchmark interest rate at their meeting in April to stave off rising inflation in the region’s core economies.
Data released 25.03.2011
US 13.30 Personal Income / Consumption (February)
Core
US 15.00 Pending Home Sales (February)