Although the decision had largely been priced into the market, after the Federal Reserve announced that stimulus would be tapered by another 10 billion US Dollars several currencies were left reeling.
The Pound slipped against its US counterpart for a third day as investors processed the decision and compared it with the Bank of England’s commitment to holding interest rates at record lows.
Sterling also slid against the Euro in spite of a report showing that UK mortgage approvals achieved a six-year high in December.
Approvals increased from 70,820 in November to 71,638 in December – the tenth monthly increase and just shy of forecasts.
The Pound was little-affected by the data but slid against the Euro as the common currency was supported by surprisingly upbeat domestic news.
German joblessness falling by more-than-expected was the first development to lend the Euro underlying support.
The unemployment rate in the Eurozone’s largest economy surprised investors by falling from 6.9 per cent to 6.8 per cent (a twenty-year low) as the number of jobless declined by 28,000 rather than the 5,000 expected.
The result reflects the rising confidence seen in Germany in recent months and prompted this response from strategist Annalisa Piazza; ‘German companies might expect increasing profitability in the future, stepping up with some new hiring’s. Part of the improvement in the labour market is due to the positive effects of the German structural reforms implemented ahead of the crisis. Those have helped to create a more resilient and more flexible labour market that is not affected much by cyclical swings.’
The GBP/EUR pairing consolidated losses as separate figures showed a ninth month of rising economic confidence in the Eurozone.
Although measures of industrial confidence and the business climate fell short of estimates, consumer confidence came in at -11.7 as expected and the measure of economic confidence advance from an upwardly revised 100.4 to 100.9 in January.
The result was the latest in a string of signs that the Eurozone’s tentative recovery continued as 2014 got underway.
However, while the Euro did advance on the Pound after the data was published, it struggled against the US Dollar.
In the opinion of one London-based economist, even if the Eurozone’s economy expands by 1 per cent over the course of the year it won’t be enough to allay fears regarding unemployment and public finances.
With German inflation data still to be released, additional GBP/EUR volatility can be expected to occur before the close of local trade.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8267,
Euro,,US Dollar,1.3600,
Euro,,Canadian Dollar,1.5196,
Euro,,Australian Dollar,1.5558 ,
Euro,,New Zealand Dollar,1.6703 ,
US Dollar,,Euro ,0.7352,
Pound Sterling,,Euro,1.2095,
Canadian Dollar,,Euro,0.6575 ,
Australian Dollar,,Euro,0.6430 ,
New Zealand Dollar,,Euro,0.5987 ,
[/table]
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