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 The Pound rallied to the highest level in two-weeks against the Euro yesterday, rising through 1.2050, 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 before the Bank of England interest rates announcement at midday, 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 yesterday, dipping to lows in the region of 1.5825 before a partial recovery during the Asian trading session. The positive UK economic data this week means the Bank of England are even more unlikely to ease policy further in the lunchtime announcement and investors will have to wait for the minutes of the meeting later this month to gauge the mood within the MPC. The Bank of England governor Mervyn King and the nine-strong committee may vote today to complete the current round of stimulus, as debate rages on whether policy makers will bring the bond-purchasing program to an end at £325 billion. In the May interest rate meeting, officials will be armed with fresh data on first quarter gross domestic product and we know that at least two members would back a further increase. 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. Economic surveys this week have renewed the sense of optimism that the economy is gaining momentum, but members Adam Posen and David still see downside risks with their colleagues concerned about the risks to upside inflation. EUR/USD The Euro is under pressure against the majors and lost further ground versus the U.S Dollar through the course of the day, amid ongoing concerns over the Spanish economic outlook and doubts that the struggling nation will be able to sustain current policies. The latest bond auctions 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 on the day, 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. If you need any further assistance, or require a live dealing quote - please do not hesitate to contact me on 01736 335250 or send an email to info@torfx.com Regards,
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