NEW YORK (TheStreet) -- The pound starts the day back up toward the highs of the week against the dollar. The euro weakened in overnight trade over speculation China was looking at diversifying its euro-denominated reserves. But comments coming from China in early trading have alleviated these fears, and the euro has bounced back up against the dollar, taking the pound higher with it.
U.S. new-home sales yesterday pleased the market by coming in well above expectations and posting their highest level in almost two years. Durable goods orders also saw an impressive rise to 2.9% in April.
The overall story in the market remains the same. Sentiment looks set to continue to drive currency movements as investors monitor developments in Europe and Asia and their resulting impacts on the financial markets.
GBP: The pound experienced a calmer session on the exchanges on Wednesday. Signs that central banks, particularly the Federal Reserve, may reduce credit lines in the near future unsettled the pound during the morning session.
It was able to relax back as the threat of risk aversion waned somewhat on mortgage data. Mortgage approvals showed an increase of 15.5%, with the amount of lending rising by 1.825 billion pounds in April. An Organisation for Economic Cooperation and Development (OECD) report said that the U.K. would have to look to increase interest rates to curb inflation, another supporting factor for the pound. However, Bank of England Governor Mervyn King has stressed that these inflationary pressures are due to temporary measures and that the rate of inflation will fall back into line in due course. With no major data due out in the U.K. today, the pound is likely to trade off market sentiment.
