US$/GBP - 1.544

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Sterling remained close to a 9 month low against the US dollar and improved slightly against the euro yesterday as concerns mounted over the level of UK debt and the weak economy. With little fundamental data out, markets traded on news released over the weekend that showed no party currently had a majority leading into the next election. A hung parliament is an issue for currency markets, as the government would not have the requisite majority to push through the tough legislation needed to bring the UK clear of record levels of debt. With the UK’s public finances firmly in the spotlight following Friday’s announcement of a £4.3bn hole in the public purse for January, rumours of a hung parliament are likely to keep sterling in check until a clear winner is announced. One positive is that the UK’s dismal 4th Quarter GDP growth figure of 0.1% is expected to be revised upwards to 0.2%. However, with renewed concerns mounting over the state of the UK, unless the figure wildly outperforms expectations this is unlikely to cause sterling to move. Today we have the Monetary Policy Committee testifying to the Treasury Select Committee over the recent Inflation Report. This could be interesting, as the economic forecasts coming out of the bank seem to vary each month and there could be some sterling movement if the MPC members get a ‘grilling’. In addition, mortgage approval data is released which is expected to show a marginal decline.

Call in now, as there is a significant risk that sterling will continue to decline against both US dollar and the euro as a debt crisis mounts in the UK.

In the Euro zone, more and more traders are taking bets against the single currency as the prospect of severe fiscal tightening in Spain, Portugal, Greece and Ireland is expected to stifle the economic recovery in those countries. Against the US dollar, the European Central Bank is unlikely to look to raise interest rates for some time – this contrasts with the Fed who are likely to move to raise interest rates much sooner. This suggests the euro is likely to suffer against the US dollar. With limited data out today to drive the markets, trading yet again rests around sentiment over Greece and questions surrounding the ability of a centralised monetary policy to efficiently manage a 16 country currency. French inflation and consumer spending is released alongside Germany’s business confidence for January. Call in now as there is scope for significant movement.

In the US, a lack of data meant trading was fairly flat aside from marginal strengthening of the US dollar against the euro and sterling on concerns over debt levels in the UK and also the Greek situation. Today, we have consumer confidence data which is expected to be around the same level as last month. In addition, a member of the Fed’s monetary policy board is due to speak. Any comments that particularly point towards increased rates will see US dollar strength. However, the big event is tomorrow, when Fed Chairman Ben Bernanke testifies to the House Financial Services Committee – as head of the Fed, his rhetoric holds clues as to the future direction of monetary policy and most importantly timings of upcoming rate rises. However, despite Friday’s shock rise in the discount rate, Bernanke was keen to downplay sooner than expected interest rate rises. Regardless, there is a lot of potential for movement so get in touch now to avoid losing out.

Call 0808 163 0102 or +44 (0) 207 898 0541 from outside the UKor fill out our quote form: http://www.smartcurrencyexchange.com/quote.aspx