The Pound benefits from lower yielding currencies

Foreign Exchange News Update

The Pound benefits from lower-yielding currencies like the U.S Dollar and Japanese Yen, as UK stocks rallied following the better-than-expected economic data. However, the UK currency retreated back towards $1.5540 against the Dollar and it seems that the Pound is struggling to find momentum, as investors return to the relative safety on dollar-denominated assets.

The Pound rallied 1% against the U.S Dollar to a high of $1.5660 and continues to test resistance close to 1.22 level versus the Euro. A separate report earlier in the day showed that Britain posted a smaller budget deficit in July than expected, as the UK economy surged in the second quarter.Net borrowing was just £3.17 billion, despite expectations of £4.8 billion, as the government plans to detail £61 billion worth of cuts to government departments to narrow a deficit that is currently 11% of gross domestic product.

Following on from last week, the Pound rallied strongly against the U.S Dollar, rising up from the key support at $1.55 for a second day in succession on Thursday, while the UK currency also made gains versus the majority of the 16 most actively traded currencies. A report from the Office of National Statistics showed that UK retail sales unexpectedly jumped in July by roughly four times initial estimates to record the biggest increase in five months.

The Pound continued to decline against the U.S Dollar on Friday, falling back towards $1.5520 in London, as UK stocks slumped for a third straight day. The FTSE 100 Index has sank to the second straight weekly loss, led by a decline in mining shares, which has increased the demand for the safest assets like the U.S Dollar and Japanese Yen.

Foreign Exchange News EUR/USD

The Euro was unable to secure any significant buying support in European trading on Friday and, after hitting selling pressure close to the $1.2830. The single currency was undermined initially by persistent weakness in risk appetite, as concerns over the global economy increased following the plethora of U.S data released on Thursday.

The Euro has weakened to test support levels below $1.2750 and a break of this level could trigger a sharp move to lows around $1.2670. There will be unease over the U.S gross domestic product and housing related data and this will tend to reinforce caution towards riskier assets.

Tags:  euro, foreign exchange news, japanese yen, lower yielding currencies, us dollar