EN:Pound to euro: Balance of payments improve but direction remains sideways
The pound to euro exchange rate is 0.016% lower on the day with 1 GBP = 1.1420 EUR at 10 AM in London.
The pound to dollar exchange rate is 0.629% higher with 1 GBP = 1.5686 USD.
Latest statistics show that the goods trade deficit narrowed to 7768 million pounds in August from the revised 8156 million pounds deficit in July.
One obvious explanation for the improvement is that a weaker pound is helping sustain growth in the UK manufacturing and exports sector.
It continues to be a case of sideways trading for this pair, amid some mixed UK unemployment data.
Richard Driver, an exchange rate analyst with foreign exchange services firm Caxton Fx says:
"Data yesterday revealed that there were fewer additional unemployment claimants than expected. However, the unemployment rate actually rose from 7.9% to 8.1%, which represents the highest monthly reading in years.
"There has been talk lately of a 50% write down on Greek debt; this has failed to weigh on the euro but will surely impact if such a haircut comes to fruition. Optimism continues to surround the single currency, with the 2nd Slovak vote highly likely to produce a positive outcome by tomorrow. This pair is trading fairly flat at €1.14 and if anything, risks are to the downside."
Sterling took advantage of a very weak day for the US dollar and climbed by two cents.
For a few weeks in September, market sentiment really was at rock bottom levels. The dollar went from strength to strength as fears of a eurozone meltdown and global recession took hold. The latter is still very much on the table but the headlines in recent sessions has inspired some confidence that eurozone officials will actually take the action that is required to avoid disaster. Safe-haven dollar investment is being unwound to some extent then, but will remain a key beneficiary of any future downturn in sentiment that may come.
Last night’s Fed minutes provided few surprises, revealing that all policy options were considered at its last meeting, including QE3. Clearly the bar for QE3 is set high but will undoubtedly be resorted to if economic conditions in the US deteriorate significantly. This pair trades up at $1.57.
