Increase in risk appetite sees sterling hit highs against dollar
18/Aug/2011 • Currency Updates•
It was an up and down day for sterling yesterday, which saw initial losses of almost 0.5% against the USD against a range of other currencies on the back of a surprise outcome from the Bank of England minutes. Sterling then regained its losses to carry on to its highest level against the dollar since May 3rd on the back of increased risk appetite. It was also buoyed by buying from a UK clearer, said to be related to a merger and acquisition deal.
The BoE decided to leave its key rate unchanged at a historic low by a unanimous vote in August for the first time since May 2010, after Spencer Dale and Martin Weale gave up their call for a rate hike. The minutes showed that in the meeting held 2 weeks ago most members judged that it was appropriate to maintain the current stance of monetary policy. Unemployment figures also released on Wednesday morning showed that British unemployment had an unexpected rise in the 3 months to June.
The euro rose sharply against the dollar but support elsewhere was limited on Wednesday, as global equities were stabilizing after last week’s roller coaster ride and trying to digest the press conference between German Chancellor Angela Merkel and France’s President Sarkozy.
Eurozone inflation fell in July, although it remained above the European Central Bank’s target. The European Union’s official statistics agency Eurostat said that consumer prices fell by 0.6% from June, but were up 2.5% from July 2010.
Wednesday outlined an appetite for riskier assets as the dollar made losses all round. US producer prices, one of the factors watched for inflationary pressure in the economy, unexpectedly increased in July, according to figures released Wednesday by the Labor Department, with prices rebounding after falling in June.
The Labor Department said its producer price index rose by 0.2% in July following a 0.4% decrease in June. Most economists had predicted no change in the overall level of producer prices.
The Swiss franc jumped on Wednesday and could hit record peaks against the dollar and euro in the days ahead as new measures by the Swiss National Bank and Swiss government slow the pace of the currency’s climb disappointed investors who had bet on more aggressive action.