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Pound poised to rise ahead of approaching US debt ceiling

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Pound Sterling

The Pound has weakened for a third day against the US Dollar, approaching its lowest level in a month. The currency is set to weaken further as the markets await the outcome of the latest report on UK house prices which are expected to remain unchanged. Against the Euro the Pound is holding steady ahead of the release of the latest Eurozone Producer Price Index, which is expected to come in below last month’s level at 2.4%, any figure worse than that and the Pound could make some gains.

US Dollar

The safe-haven US Dollar took losses at the end of last Friday’s session due to a jobs report that showed a moderate improvement in the US economic recovery, leading to investors taking more risks.

This week, Dollar traders should be aware of Thursday’s unemployment claims figures and Friday’s Trade Balance report. If either indicator shows further improvement then the Dollar could make losses as investors opt for riskier assets. Traders should also be aware of any further developments regarding the USA’s debt ceiling. The US government is expected to run out of money in the next two months if the debt ceiling is not raised, which would allow more money to be borrowed. If lawmakers fail to reach a deal to raise the debt ceiling, risk aversion is likely to boost safe-haven assets.

The Euro

The Euro made gains against its safe-haven rivals last week after a better-than-expected jobs report out of the United States led to risk taking in the market. This week, Euro traders should be aware of the European Central Bank press conference due to be held on Thursday. Analysts are not expecting the ECB to make further cuts to interest rates but the conference will provide an opportunity for EU officials to discuss the state of the economic recovery in the region. Any signs that the Eurozone is heading deeper into recession will almost certainly weaken the currency.

Australian Dollar

The ‘Aussie’ has strengthened against most of its major currency rivals today due to the markets speculating that Japan will increase its spending to boost its economy. An increase in spending will be a boost to Australia, one of Japans major trade partners, and will be good for the nation’s exports.

Against the New Zealand Dollar the ‘Aussie’ made gains ahead of the release of data that is expected to show that building approvals and retail sales both increased in the bigger country. The ‘Aussie’ was also aided by a 70% jump in the price of Iron Ore, Australia’s biggest export to China.

New Zealand Dollar

The ‘Kiwi’ is trading down against the Australian Dollar and is expected to extend its declines as the Australian currency rallies thanks to rising commodity prices and an improving Chinese economy. New Zealand's currency could make gains against the ‘Greenback’ this week as traders resume regular service after the Christmas and New Year holidays.

Canadian Dollar

The ‘Loonie’ posted its biggest gain against its US relation in five months last Friday due to US employers adding almost twice the forecasted number of new jobs. The currency was up against the majority of its peers after being helped by the country’s unemployment rate falling to a four-year low in December.

South African Rand

The Rand has weakened against the US Dollar as traders remain cautious over the US debt ceiling. The US Federal Open Markets Committee didn’t help matters by releasing some fairly negative comments over future budgetary negotiations.

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