The Pound’s recent rally against the Euro and US Dollar came away somewhat today. Profit taking left Sterling down over 0.6% against both the Euro and the US Dollar. The Pound made strong gains against the Australian Dollar and New Zealand Dollar today. Expected monetary policy tightening in China is likely to hit future commodity prices.
A series of US Data was released in the afternoon and this affected investor sentiment somewhat. Existing home sales were up to 5.28m for December, which is higher than the expected 4.87m. Initial jobless claims were also slightly down at 404,000.
The Philadelphia Fed index for January was released today. This surveys American manufacturers about business conditions and is a useful indictor of business confidence. A high figure indicates a positive outlook and is generally well received by the markets. January’s survey gave a figure of 19.3 which was lower than the expected 20.8. This combined with less than exciting data for home sales and jobless claims meant that investors took profits from the more risky currencies and bought into the safe haven of the US Dollar
Fears over potential monetary policy tightening in China came in over night as more strong growth was reported. Figures showed that Chinese GDP growth rose to 9.8%, which beat expectations. Growth for the year is now 10.3%, up 1.1% from 2009. This affected the key commodity currencies of Australia, New Zealand and South Africa. If China was to increase interest rates further this would reduce demand for commodities and affect commodity exporting economies. This is especially crucial for Australia, which is already reeling from the floods in Queensland.
In other news the Turkish central bank unexpectedly cut interest rates by 25 basis points today. At one point this morning, the pound was 2% up and is now at its highest point against Turkish Lira since the summer of 2009.
