Sterling has suffered today, the austerity measures set to be announced on Wednesday were always going to see selling pressure on the pound return to the markets. There is a saying in the markets that goes ‘sell fear’ and ‘buy fact’. This is not of course always the case.

Traders await Wednesday’s release in the hope that it will be either a disaster or better than expected, in the hope to make a quick buck. If the measures set to reduce the budget deficit on Wednesday are in line with expectations or slightly better we could see the pound make substantial gains. Of course QE is however still looming on the horizon of next month.

The global currency war continues with the exception of the euro. The major countries are still desperately trying to devalue their currencies in the hope of boosting exports and helping their economic causes. In the absence of negative economic news we would expect to see the euro continue to strengthen in the short term.

Those who have been in the market for currency for a while will appreciate that these markets really do move in a cyclical fashion. Focus from selling pressure to buying pressure can quickly change on a fundamental shift of economic news. The Euro seems to have got away unscathed in the last few weeks despite the existance of economic problems within the block. Only time will tell where the next move will come from.

Luke Zorab

Torfx Currency Dealer
(01736) 335285