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Sterling weakens as investors flee to safe havens
Sterling weakened against the majority of its trading partners on Tuesday as events in Brussels, combined with poor inflation data, continued worries over Brexit, internal government problems and a troubling credit rating agency report following last week’s budget pushed the currency lower.
With a flight to the safety of US, Japanese, and Swiss safe-haven currencies in evidence throughout the morning, sterling had already seen a significant fall from recent one-month highs before the release of inflation data for February. These figures showed that inflation had failed to accelerate as expected to 0.4% in February, instead matching the 0.3% growth seen the previous month. Against a backdrop of uncertainty over UK membership of the EU, this has seen sterling move close to recent one-year lows against the euro.
Mixed fortunes for euro despite Brussels attack
The euro again suffered mixed fortunes on Tuesday as it weakened against the US dollar as the terrorist attacks in Brussels hit the euro early in the day. However, this also affected sterling as the terrorist attacks increased the likelihood of a Brexit. This, combined with better-than-expected Purchasing Managers’ Index (PMI) figures for the Eurozone, caused the euro to push back to thirteen-month highs against the sterling.
Today there is no data or news expected from the markets. It is likely that euro movements will be dictated by the aftermath of yesterday’s events, or as a result of events elsewhere.
New home sales data due from the US today
It was yet another quiet day in terms of US data on Tuesday, with a Flash Manufacturing Purchasing Managers’ Index being the only major release. This showed mild growth, but failed to meet expectations. Due to this, US dollar movement was mainly dictated by both sterling and euro weakness as a result of the Brussel attacks earlier in the morning and the safe haven status of the US dollar.
We have a similar story today, with only New Home Sales due to be released; this is expected to show an improvement on the previous month’s figure. Other than this, investors will be looking elsewhere for factors that could affect US dollar movement.
Stronger Australian dollar has adverse effect on exports
In a rather quiet week leading up to Easter, it was the Australian currency that enjoyed the biggest gains yesterday as its dollar continued to strengthen. Reserve Bank of Australia Governor Stevens spoke early yesterday and was pleased with the way the Australian economy was handling the change in commodity prices. However, it is not necessarily good news for all of the Australian economy as a stronger dollar is making their exports a lot more expensive.
