Quiet day for Sterling as confidence in the global economy grows
28/Αυγ/2012 • Currency Updates•
The euro gained against the majority of its peers as investors speculated that European leaders will make progress on measures to stem the region’s sovereign-debt crisis. The single currency traded near a seven-week high against the dollar after German business confidence fell less than some economists forecast and as German Finance Minister Wolfgang Schaeuble said Germany and France will create a working group to enhance the region’s monetary union. Sweden’s krona appreciated after retail sales increased more than forecast.
However, German business confidence fell for a fourth straight month in August as the sovereign debt crisis curbed growth in Europe’s largest economy. The IFO institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 102.3 from 103.2 in July. The debt crisis has driven up borrowing costs in Spain and Italy, threatening the survival of the euro and undermining confidence in Germany, which sells about 40 percent of its exports to the euro area.
Sterling fell against the dollar on Friday after revised UK GDP figures pointed to a shallower recession in line with expectations, wrong-footing some market players who had expected an even smaller downturn. Monday saw a bank holiday in the UK so no data released.
The Dollar Index (DXY), which tracks the greenback against the euro, yen, pound, Canadian dollar, krona and Swiss franc, surged 16 percent from last year’s low in May of 72.696 to this year’s peak of 84.1 on July 24. It has since slipped 3 percent since then to 81.61 at 2:24 p.m. in New York. Large speculators, such as hedge funds are abandoning bets on a stronger dollar at the fastest pace ever amid growing confidence in the global economy.
Futures contracts favouring gains in the U.S. currency surged to the most on record in June as growth faltered and investors retreated from risky assets. Now, hedge funds are reversing those bets as central banks from China to the U.S. vow to stimulate their economies, prompting money managers to seek higher returns from Sweden to Australia. CB consumer confidence is the only major data today from the US, however little change is expected on last month’s figure.