Skip to content

Risk aversion roars back into global markets to rally the dollar

US Dollar:
The dollar took more gains against the euro and pound yesterday which has continued into this mornings trade as risk aversion storms back into the markets and a flight to safety see's the greenback rally. Investors remain nervous about the situation in Europe and there is a feeling that despite the monster numbers being used as a backstop for Greece, the problems across Southern Europe have plenty of sting in the tail yet. Fresh austerity measures in Greece, Spain and Portugal failed to assuage market fears, and instead the measures have only heightened concerns about social unrest and a weakening growth outlook, all leading to a surge in the value of the dollar as investors take cover in what are perceived as safer positions. Investors were also nervous about the US retail sales from April set to be reported by the government Friday. Data 13.30: Core Retails Sales M// M expected 0.5% from 0.9%. Retails sales M/M 0.3% from 1.9%. 14.55: Prelim UoM Consumer Sentiment expected 73.8% from 73.2%.     

Sterling has not had a good start to the day as it has extended losses against most major currencies on the back of extensive falls on Thursday. Yesterday saw a much weaker than expected trade balance, coming in a cool  £1 billion lower than expected as the figure posted was -£7.5B. This along with an uncertainty on how steep the cuts will be from the new collation government sent the pound down in a steep curve. Data showed exports suffered in March, despite the decline in sterling over the past several months. Risk aversion as a result favours the dollar over the pound. Cable has now given up over five cents to fall from the $1.50 level down to $1.4550. Even against an under fire euro the pound fell, giving up half a cent from yesterday to trade around 1.1620. In the UK, the new government appears to be confident of curtailing the fiscal deficit and that has helped reduce fears of a rating downgrade. The economic recovery remains fragile and expected fiscal tighten¬ing will bring down inflation, all of which means that the Bank of England will hold rates near record lows for a longer period. Data 10.00: CB Leading Index M/M.

Euro: Traders are continuing to take a longer-term bearish stance against the euro as we see the decline against the dollar gather pace. Four days on from Mondays mega European bailout package the market finds itself pondering the medium-term impact of Europe’s massive debt burden. The bailout can address liquidity concerns, but austerity is needed to get debt levels back under control. And fiscal austerity implies slower growth, which in turn suggests monetary policy will be loser for longer, with low interest rates adding more downward pressure on the euro. The single currency has now given up over two cents in the last few days against the greenback to trade under the $1.25 level. A battle between the euro and pound is being played out for who is uglier, as sterling battles with its own demons and the euro makes back lost ground seen earlier in the week. Analysts warn that despite recent losses the euro is likely to depreciate further.  
No major data. Speakers 13.20: Buba President Weber.



• Gold has continued to rally as buying in Asia pushed the precious metal even higher to $1,236.53 an ounce. This has come as speculation regarding the massive debt burden facing Europe sees investors run for cover to the safe haven commodity.

For more information or to request a call back click here


GBP/USD 1.4586
GBP/EUR 1.1648
EUR/USD 1.252
GBP/JPY 135.12
GBP/AUD 1.6303
GBP/NZD 2.0450
GBP/ZAR 10.9452
GBP/CHF 1.6327
GBP/CAD 1.4917
GBP/SGD 2.0149
GBP/THB 47.14
GBP/HKD 11.3494 red-down; blue-up (snap shot)


These rates are for indication purposes only

For more information or to get the latest spot rates contact:

John Paul Georgiou
Senior Foreign Exchange Broker