Pound looses ground against Euro

Paresh Davdra is the Dealing Director of RationalFX, Currency Specialists. Tuesday 06th January 2015 17:20 EST

The Pound lost ground on Friday and fell from annual highs against the Euro after UK manufacturing unexpectedly slowed to a three-month low in December as weak growth in overseas markets such as the euro area undermined demand. The report showed overseas orders stagnated in December, highlighting the economy’s dependency on domestic demand to sustain growth.

The Bank of England also said that consumer credit rose 1.3 billion pounds ($2 billion) in November, the most since February 2008. It also said mortgage approvals declined in November, though by less than economists forecast.

In the US initial Jobless claims fell by 9,000 to 280,000 in the week ending Dec. 20, the fewest since early November, from 289,000 in the prior period.  Rising demand is encouraging businesses to take on more workers. Better job prospects and cheaper fuel costs signal increased consumer spending, the biggest part of the economy, will provide another boost to the expansion this quarter following growth from July through September that was the strongest in more than a decade.

Consumer confidence rose in December, according to the latest Conference Board report, but not by quite as much as expected. The board’s index climbed to 92.6 from 91 in November (revised up from 88.7). This was slightly below forecasts of 93.9. Consumers’ view of current conditions was more favourable in December, with those saying business conditions were good unchanged at 24.8% but those saying they were bad falling from 21.8% to 19.6%.

The Dollar took full advantage of the UK’s figures on Friday, strengthening over two cents against the Pound despite disappointing manufacturing figures from the US.

In Europe Greece faces snap elections this month that risk severing the international lifeline that has supported the country since it sparked Europe’s sovereign debt crisis in 2010. Yields on the 10-year Greek bond jumped after the result of the vote was announced in parliament. The benchmark Athens Stock Exchange dropped 4 percent after falling more than 11 percent earlier in the day, the biggest slump among 18 western-European markets.

The value of the euro fell to its lowest level since the middle of 2010, following comments from Mario Draghi, the president of the European Central Bank (ECB).He hinted again that the bank might soon start a policy of quantitative easing to try to stimulate the Euro zone economy. The aim would be to stop the continued fall in the general level of prices. The euro fell 0.4% after Mr Draghi's comments were made public.

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