So it would appear the Pounds movements at the moment are being mainly determined by events on a global scale, but still appears to be benefiting from a Safe Haven position. Safe Havens when referred to by an investor is the place they feel their funds are safest and protected from volatility. Globally the USD benefits from this position the majority of the time but as the UK has managed to escape ‘relatively’ unscathed from the Eurozone debt crisis it has also been seen as the place to have your funds. The BofE in the last week has talked and hinted about further stimulus programmes to boost growth and even retail sales yesterday came in far better than expected, so even though we are in recession things appear to be on the up.
The Euro is still in the thick of everything as 15 banks across Europe and the world that are deemed to have too much exposure to European debt were downgraded last night by Moody’s. The various cuts were range bound in their severity but mainly with a negative outlook, which could lead to further downgrades. It was also reported in the papers the ECB may actually completely scrap credit rating agency assessment of Eurozone debt, I personally feel this is an immature attempt at trying to calm markets by not allowing headlines around the world to be dominated by downgrades when they happen. Spain did manage to raise the capital it was looking for yesterday but again at a significantly new higher cost. Once again highlighting they are in desperate need for a bailout to help with their sovereign debt, how quickly will remain to be seen. After being offered up to €100bn two weeks ago by the IMF an independent audit of Spanish banks revealed they would only need €62bn.
It seems economic data no longer drives the direction of the Dollar as fears in Europe are pushing large investors to the US. A recent run of negative data has done nothing to weaken the dollar, unemployment and housing both coming out weaker than expected yesterday, but it still remained strong against a majority of currencies. The FED this week confirmed it would be extending its Operation Twist programme in an attempt to boost growth.