The news from Dubai has proved a short term blow for the Pound, as investors look to revert to the safe haven status of the USD and the Japanese YEN.
Dollar appreciated from around the 1.67 level to mid 1.62 in forty eight hours as panic set in within financial markets, as buyers of commodities such as Gold saw a need for further security.
The affect on the Pound was felt across a range of industries as two of the biggest investors in the Gulf state, Barclays and RBS saw shares drops on the fear of a deferral of the monthly payment of the $80bn debt.
Previously felt pressure on the USD was eased as high yielding emerging currencies slumped.
The sentiment in the markets earlier in the week had been far more positive as Gold hit a record high of $1173.50 an ounce on 26 November with many traders being more confident in the long term prospects of commodities.
In view of this upsurge the USD slid against 15 of the 16 major currencies.
Sterling strengthened marginally earlier in the week with the expectation of revised inflation data raising confidence about the position of the economy. However, the bias towards economic intervention taken from the Bank of England’s minutes upheld the nervousness around the Pound.
The week ahead may be Dollar dependant as a plethora of data including Non Farm employment Change and the unemployment rates are published on Friday, whilst potentially rate affective data from Australia and the Eurozone completes a busy week in the financial markets.
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