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Sterling struggles against Greenback

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Pound Sterling

The Pound has dropped below the all important 1.60 mark slipping to a 6-week low against the US Dollar. The slump comes due to weakening demand for riskier currencies after rising Spanish bond yields and comments from the Bank of England spooked the markets. The BoE Governor Sir Mervyn King said that the Bank’s actions to aid the nation’s economy were reaching the limits of their effectiveness and warned that Britain faces a prolonged economic adjustment.

The decline could be limited however if tomorrow’s third quarter UK GDP figures meet economist’s expectations. The UK economy is forecast to have grown by 0.6% meaning that the country will have dragged itself out of the double dip recession.

US Dollar

The ‘Greenback’ has made gains against most of its major peers due to an increase in demand for safe-haven currencies and the revelation that the Bank of Japan will soon unveil a new round of monetary easing. Against the Yen, the Dollar came close to a three-month high and against the British Pound rose above 0.627. Key data for Dollar traders today is the release of the latest US new home sales figures, good figures from that is likely to ensure that the Dollar continues to make gains for the rest of the week.

The Euro

The Euro has weakened against its peers and is expected to make further losses. The 17-nation currency traded near a one-week low against the Greenback amid investor uncertainty that Spain will finally seek a bailout. Today sees a number of important data releases for the Euro with the latest services and manufacturing PMI’s predicted to show that the region’s debt turmoil is continuing to weigh on economic growth.

Australian Dollar

The ‘Aussie’ has surged after China posted a better-than-expected purchasing managers index. The index rose to 49.1 in October, up from a final level of 47.9 last month. Demand for the Australian currency was also supported after data showed the nation’s consumer prices accelerated more than estimated in the third quarter, giving the Reserve Bank scope to pause next month’s plans to cut interest rates.

New Zealand Dollar

The ‘Kiwi’ has fallen against its Australian relation but made gains against the British Pound and US Dollar. The New Zealand currency received a boost from upbeat Chinese manufacturing data and the accelerating pace of inflation across the region. Thursday will see the Reserve Bank of New Zealand announce its decision to hold the current interest rate or not. Economists are unanimous in their expectation that the Bank’s governor will hold the current 2.5% level.

Canadian Dollar

The ‘Loonie’ erased yesterday’s losses against the ‘Greenback’ after the nation’s Central Bank left its interest rates unchanged. Central Bank officials said the economy is expected to expand moderately because of global headwinds and household debt burdens. The upbeat news out of China also aided the Canadian currency as the price of raw materials increased and demand for commodity based currencies improved.

South African Rand

The Rand is slightly firmer against the Dollar today after hitting one week lows in a wave of global risk aversion and as a nervous market awaits the medium-term budget. The country’s finance minister Pravin Gordhan faces a tough task of balancing demands for increased social spending and keeping investors and ratings agencies happy that he is reining in the nations spiralling budget deficit.

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