The stock markets bounced back following the losses caused from the nuclear crisis in Japan. The major stock price fall encouraged investors who believe that certain stocks are undervalued to return to the markets helping the exchange markets to lift off the bottom.
UK gross domestic product (GDP) released yesterday showed that it shrunk less than feared, as the figure was once again revised to -0.5%. Although a slight improvement, other figures released from the office for national statistics showed the UK’s trade balance continues to worsen with the deficit reaching almost £27bn in the last quarter of 2010.
Sterling continued to suffer against all sixteen of the most actively traded currencies, as the currency market is driven by the speculation on who will increase interest rates first.
It is widely expected that the European Central Bank will be the first at their meeting next week with the Federal Reserve closely followed, leaving the Bank of England trailing behind. Sterling traded just above 1.13 against the Euro and 1.60 against the USD.
Despite the rating agency Standard & Poor’s downgrade of both Portugal and Greece the Euro continued to gain against Sterling.
It is widely expected that Portugal will require a bail – out in the near future whilst Greece is expected to default on its sovereign debt.
The High yielding currencies were boosted yesterday by the speculation that the European Central Bank is soon to stop asset – repurchasing program (withdrawal of support for purchasing government bonds). The AUD, NZD and ZAR all benefitted.
