Sterling was put on the back foot yesterday after a combination of political and economic news damaged the credibility of the coalition government.
On the economic side, UK borrowing rose to a new monthly record although we must caveat this achievement slightly. November is usually poor due to the sharp fall-off in corporate tax receipts and, according to those in the know, this is particularly true of this month in particular. Secondly, we have under-shot expectations a fair few months in the past year and therefore one over the expected amount is not cause to run around screaming. It did hit the pound however and it put in its day’s lows against EUR and USD of 1.1739 and 1.5436 respectively.
The revelation that Vince Cable had been caught on tape ‘declaring war’ on Murdoch and the ensuing media circus also damaged the pound albeit slightly.
For those of us still around we have UK GDP today and we are with the consensus in that it will remain unchanged at 0.8%. There is the possibility that the construction element is the one to wobble; the national accounts are released at 09.30.
In Europe it is once again the periphery that is garnering the headlines. Fitch are said to be considering revising Greece’s credit rating to junk status. To be honest this sounds like catch-up more than anything as they are the only agency who currently hold an investment grade rating on the country’s sovereign debt. They are looking for ‘fiscal repositioning’ by the end of January, something that is unlikely to happen.
Spain was also in the spotlight after a 3 and 6 month bond auction showed that yields on its debt are still rising to 1.804% and 2.597% respectively. I marked the sale as around 6/10 in the immediate aftermath and that is about right; not a perfect result by any stretch of the imagination but by no means a disaster. This kept the euro weak in the afternoon session with the US dollar making good gains against the single currency.
US GDP for the 3rd quarter are announced today at 13.30 and we are expecting to see a slight uptick from 2.5% to 2.8%; a scenario that would continue the US dollar’s recent surge.
Minutes from the Bank of England latest meeting are not expected to be particularly volatile as we expect the voting record to remain at 7-1-1 with Sentence and Posen both dissenting for the own particular reasons.
| Indicative Rates | Sell | Buy |
| GBPEUR | 1.1761 | 1.1789 |
| GBPUSD | 1.5459 | 1.5484 |
| EURUSD | 1.3129 | 1.3150 |
| GBPJPY | 129.31 | 129.58 |
| GBPAUD | 1.5491 | 1.5515 |
| GBPNZD | 2.0794 | 2.0827 |
| GBPCAD | 1.5685 | 1.5713 |
| NZDUSD | 0.7424 | 0.7446 |
| GBPZAR | 10.50 | 10.55 |
| USDZAR | 6.7891 | 6.8188 |
| GBPPLN | 4.6856 | 4.7130 |
| EURJPY | 109.82 | 110.10 |
Rates are dependent on amount transacted.
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