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25 out of 27 countries agree budget rules on Eurozone members

A move higher in cable was seen in yesterday's afternoon trading session on a combination of heightened risk appetite, a positive outcome in both Greek PSI talks and the EU summit and not to forget last weeks QE chatter from the Fed. The pound put a cent on its US counterpart as we headed for the $1.5750 level. Sterling was also helped by an unexpected upturn in Uk consumer confidence numbers for January which came in higher than expected. A glimmer of light was shed on the economy after a leading survey suggested that consumer confidence improved in January with a number printed of -29 with -31 expected. the pound's position held firm against the euro, which did stage a fightback on the outcome of the EU summit and Greek PSI talks, which did seem to favour the single currency. despite this, GBP/EUR continued to trade around the 1.1950 level.
Data 09.30: Net Lending to Individuals and Mortgage Approvals.


The euro benefitted from a positive end to Monday as EU leaders struck a deal last night on terms of a pact, whose objective is to reinforce the single currency by toughening Europe's budget rules. 25 EU states agreed the treaty with only the UK and Czech Republic staying outside. Combined with post summit comments from the Greek PM who raised hopes for a Greek PSI deal by the end of the week, noting that significant progress had been made on sorting issues with with troika. The single currency built on its gains made versus the dollar seen last week, although its hard to see exactly how much confidence has been put in the euro as a result of yesterday's outcome. Some analysts say that the reason for most of EUR/USD's moves has come from the QE rhetoric coming from the US. Against sterling there was not much change as the pound has performed well against a battered euro of late.
Data 10.00: E/Zone Unemployment Rate 10.4% from 10.3%


The dollar weakened against most of its major peers after progress had been made in debt-swap talks with bondholders, sapping demand for a refuge from Europe’s fiscal crisis. The U.S. currency dropped 0.3 percent to $1.3184 per euro and fell as much as 0.2 percent to 76.18 yen, the lowest since Oct. 31, before trading at 76.30. It also slid as much as 0.2 percent to $1.5743 per pound, the weakest since Dec. 21. The dollar was set to decline against all of its 16 major counterparts this month after the Federal Reserve extended its pledge last week to keep interest rates low through at least late 2014. Chairman Ben S. Bernanke signaled on Jan. 25 that the central bank is considering a third round of asset purchases. The Fed has already purchased $2.3 trillion of debt in two rounds of so-called quantitative easing known as QE1 and QE2. The Conference Board’s index of U.S. consumer confidence probably rose to 68 this month, the highest since February 2011, according to the median estimate in a Bloomberg News survey of economists. The New York-based private research group will release the figures today. We may see an increase in the attractiveness of U.S. dollars if the consumer confidence survey comes in better than expected as it might ease speculation that QE3 might be in the pipeline.
Data: 15.00 CB Consumer Confidence 68.2 from 64.5


•    The commodity currencies made ground against the lower yielding currencies yesterday as the Aussie, Kiwi and Canadian dollars all posted gains against the pound, euro and dollar. The South African Rand also posted a move higher as the positive rhetoric over the Greek PSI and EU summit filtered down through the currency markets.
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blue = up (snap shot)


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