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 surged to a fresh 19-month high against the Euro yesterday, after the minutes from the Bank of England's April policy meeting showed that Adam Posen removed his vote to increase quantitative easing measures this month, leaving David Miles as the only policy maker voting to increase asset purchases from the current £325 billion. The real surprise is that Posen was the member to withdraw his vote for more QE and the Pound has subsequently rallied against all of the 16 most actively traded currencies. The recent optimism surrounding the UK economy has gathered momentum in recent weeks, with reports on manufacturing, services and construction all showing strong levels of growth compared to the previous quarter. As a result, there has been widespread speculation that the MPC will not sanction any further asset purchases this year with modest growth anticipated for the first and second quarter. The Pound has traded up towards 1.60 versus the U.S Dollar where it will encounter strong resistance, while the move towards 1.22 versus the Euro will be the highest level since 2010. The latest UK unemployment data was stronger-than-expected with an increase in the claimant count of 3,600 in the latest month from a revised 4,500 previously. The jobless rate also surprisingly dipped to 8.3% from 8.4% the previous month, which was the first decline since the third quarter of 2011. The Pound found additional support following the jobless data but it was the BoE minutes that really sparked the upside momentum. Adam Posen has consistently been the most dovish member of the Bank's monetary policy committee to date and markets reacted strongly to his decision to keep QE unchanged. The Bank is seemingly more concerned over the risks of recession, but net outcome was a drop in expectations surrounding further quantitative easing. The shift in expectations pushed the Pound to a peak of 1.6025 versus the U.S Dollar and a fresh 19-month high of 1.2220 versus the Euro. The Pound also rallied against the higher-yielding currencies, peaking just under 1.55 versus the Australian Dollar and 1.9620 against the New Zealand Dollar. The move came despite speculation that China may ease policy further to support the economy, boosting export prospects for the South Pacific nations. EUR/USD The Euro was unable to make any impression on resistance levels above 1.3120 against the Dollar and remained generally on the defensive through the course of the day. There were further concerns surrounding the Spanish outlook, which had an important negative impact on the Euro. There were also further concerns surrounding the banking sector and in this environment there will be further declines in the stock market, which will have a bearing on risk appetite. There were tensions ahead of Thursday's bond auction with fears that weak investor demand would trigger another round of selling. The Italian government stated that growth and fiscal outlook was weaker-than-expected, which further undermined sentiment. Tensions were illustrated by a decline in German yields to 0.14% at the latest 2-year bond auction. In the U.S, there were no major data releases through the course of the day and the Dollar was weaker due to the improvement in risk sentiment on the day. Markets will be cautious ahead of next week's Federal Reserve interest rate decision, especially given the uncertainty surrounding monetary policy. The Euro was able to get back above 1.31 against the Dollar before the close of trading last night. 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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