Dear Subscriber, Please find below today's update which gives you an insight into the current market conditions, enabling you to keep informed and up to date on the latest currency movements. GBPEUR/GBPUSD Following on from last week, the Pound rallied to the highest level in two-weeks against the Euro on Thursday, rising through 1.21, after a report in the UK showed that growth in services industries unexpectedly accelerated in March, while house prices increased by more-than-expected. The UK currency is trading higher against the majority of 16 most actively currencies, as the gauge of services activity PMI increased to 55.3, from 53.8 in February. A level above 50 indicates growth and the report, in conjunction with positive manufacturing and construction figures earlier in the week, points to a recovery in the UK economy during the first quarter. It now seems increasingly likely that the UK will avoid a technical recession this year and the renewed sense of optimism has seen the Pound rally against the Euro, among other major currencies like the Australian Dollar and South African Rand. The move against the higher yielding currencies is largely being driven by risk sentiment, as global stocks slumped following the FOMC minutes on Tuesday and a disappointing Spanish bond auction. To that end, the Pound has traded lower versus the U.S Dollar, falling back under 1.59, as traders flocked to the security of the Dollar as a safe haven. The Euro has weakened significantly against the Pound and the U.S Dollar, after the bond auction in Spain led to renewed concerns that the region is struggling to overcome the sovereign debt crisis and restore confidence in the outlook. The Euro also declined after the European Central Bank President Mario Draghi said that the outlook for the Euro-zone remains subject to "downside risks" and the single currency is likely to continue to struggle in this environment. The Pound was unable to regain the 1.59 level against the Dollar towards the end of the week, dipping to lows in the region of 1.5825 before a partial recovery during the Asian trading session. The speculation that the BoE won't sanction any further bond purchases is enough to strengthen the Pound and the UK currency is moving higher versus a basket of currencies. The Pound did manage to claw its way back above 1.59 on Good Friday, despite the largely subdued trading conditions with the Easter break and liquidity levels were extremely low. The latest GDP estimate from the National Institute of Economic and Social Research suggested that the growth in the economy was just 0.1% for the first quarter. This would mean that the UK has managed to avoid a technical recession but that represented a much lower estimate than that derived from the recent PMI data. If the official GDP figures for the first quarter show a figure close to 0.1% this would represent a serious setback for the economy and the Pound. EUR/USD The Euro is under serious pressure against the majors and lost further ground versus the U.S Dollar through the course of last week, amid ongoing concerns over the Spanish economic outlook and doubts that the struggling nation will be able to sustain current policies. The latest bond auction recorded weaker demand and there was a sharp rise in short-term yields. The net effect was to trigger a further increase in 10-year yields towards 5.70% and there was also a slide in Spanish equities to the lowest level since November. Italian yields also rose and maintained the fears over structural vulnerabilities within the Euro-zone. The data also failed to inspire confidence, as retail sales declined and German factory orders rose by less than expected. The ECB left interest rates on hold, as widely anticipated, and in the accompanying press conference the chairman Mario Draghi stated that there were still downside risks to growth and that policy would need to be very accommodative. The comments increased speculation that the ECB will tolerate a medium-term increase in inflation due to rising oil prices. The latest non-farm payrolls data on Friday showed that the government added far less jobs than anticipated in March with a mediocre increase of 120,000, compared with expectations of a rise above 200,000. The represented the lowest reading in four months and re-ignited concerns about the U.S economic outlook and went some way to warrant Ben Bernanke's dovish rhetoric in recent weeks.
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