USD weakens but GBP gains limited
The US Fed kept interest rates on hold last night but some details in their statement were picked up by investors as being negative for the USD. The Fed said that the recovery was “likely to be modest in the near term” which was to be expected. They also acknowledged that core inflation was too low and went on to say it “is prepared to provide additional accommodation if needed” which was taken to mean another round of quantitative easing or QE2 as some are calling it.
The Euro has been one of the biggest movers against the USD climbing above the 1.33 mark after a few successful government debt auctions for Ireland, Spain and Greece which has alleviated some of the sovereign debt concerns in Europe.
Sterling was under pressure again yesterday following the UK’s borrowing figures for August which came in at more than 3bn than expected. GBP managed to climb slightly against the USD due to the Dollar weakness but this morning has fallen below 1.18 against the EUR, the lowest since July.
This morning we have the Bank of England minutes which should give a little more guide on their thinking and the possibility of more QE. Eurozone data today sees both industrial orders and consumer confidence which considering they are not out of the woods yet could come in worse than expected and hurt the Euro.