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ISEQ steady-Currency movements reviewed

Tuesday, January 29 09:20:34

The ISEQ is steady this morning at 3,553 although Far Eastern markets are strongly positive overnight. Recent sharp movements in the currency markets are reviewed by AIB Treasury:

Majors were generally little moved overnight. Yesterday, though, sterling continued the slide that followed from Friday's disappointing UK Q4 GDP numbers, as worries about the UK economy and the possibility that this will see further monetary stimulus measures weigh on the currency.

The incoming BoE Governor, that there is still scope for monetary policy to do more in the developed world, have helped weaken the UK currency.

On top of the weak fundamentals, the easing in eurozone tensions in recent months have seen a structural shift away from the safe haven flows from the eurozone into sterling that had bolstered the UK currency at the height of the eurozone crisis. Indeed, yesterday saw the euro at its highest against sterling for over a year, reaching around Stg0.8585 and it remains close to these highs. Sterling has also dropped to around the $1.57 against the dollar.

Dollar-euro, meanwhile, steadied yesterday after the strong euro gains on Friday and over the weekend.

The euro, however, continues to hover not far below Friday's (around $1.3480) dollar high. This morning starts with news that German consumer sentiment rose in January for the first time in four months and this week's run of sentiment surveys continues later this morning with French consumer confidence on the schedule. Yesterday's Italian consumer confidence numbers were weaker than had been anticipated but had little market impact. The yen sell-off also paused yesterday. While the Japanese currency has edged slightly off its lows it remains close to Monday's two and a half year dollar low. Meanwhile the AUD is firmer overnight after a rise in Australian business confidence. A heavy US economic calendar continues today to provide some market direction with Case Shiller house prices and consumer confidence data scheduled according to AIB Treasury.