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UK economy still vulnerable

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Pound Sterling

The Pound has weakened against the majority of its peers after David Riley, the head of global sovereign ratings at the credit ratings agency Fitch, warned that the UK’s AAA rating is not assured. Riley said that Chancellor George Osborne's admission in last month's autumn statement that he would miss his 2016 target date for public debt to start falling had been a "negative event" for the UK. He stressed that a downgrade of the AAA rating was not a "decided event" but warned that Britain remained vulnerable to fresh economic shocks elsewhere in the world.

US Dollar

The ‘Greenback’ saw mixed trading yesterday. A speech by Federal Reserve Chairman Ben Bernanke created risk aversion in the markets leading to an increase in demand for safe-haven currencies. Bernanke’s speech did little to bolster investor confidence as he commented on the slow pace of the USA’s slow economic recovery.

Today, Dollar traders will want to pay attention to the US CPI and Core CPI figures. Both indicators are expected to come in above last month’s results. If true, investors may interpret the news as a sign that the US economy is improving, which could result in risk taking and losses for the safe-haven Dollar.

The Euro

The Euro weakened against the US Dollar due to taking losses against its safe-haven currency rivals. Federal Reserve Chairman Ben Bernanke’s comments on the slow pace of the US economic recovery led investors to shift their funds to less volatile assets.

Today, Euro traders should be aware of the latest Euro-zone CPI and Core CPI figures, which are forecasted to generate Euro volatility today. Should either of those indicators come in above their predicted levels, risk taking among investors will likely help the common-currency recover some of yesterday's losses.

Australian Dollar

The ‘Aussie’ has weakened against most of its 16 major counterparts after the World Bank cut its global growth forecast for the year. It halved its forecast for Japan, cut the U.S. projection by half a percentage point and predicted a second year of contraction in the Euro region.

Against the Japanese Yen the currency fell for a second day in- a-row due to data showing that consumer confidence was little changed from a two-month low.

New Zealand Dollar

The ‘Kiwi’ followed its Australian relation by falling against the majority of its 16 most-traded peers. The decline was a result of comments made by Japan’s Economy Minister Akira Amari, who said that an excessively weak Japanese currency may hurt the nation’s imports, damping bets policy makers will try to push it down further.

Canadian Dollar

The ‘Loonie’ weakened against its US relation due to a fall in Canadian existing home sales and a contraction in the USA’s manufacturing sector. Against the Japanese Yen the currency weakened to a six-month low after the Japanese economy minister warned that the Asian currency was weakening too fast.

South African Rand

The Rand continues to weaken against the US Dollar and fell against the majority of its peers due to continued labour unrest in the nation’s mining and food sectors.

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