Pound Pressured by Deficits
Last week was not a good one for the pound which fell broadly against the dollar. Investors concerns about the growing size of British deficits pressured the pound in currency markets. At a summit of asset managers several participants said the pound is their ‘least favorite’ currency and predicted the pound will be used to finance carry trades in 2010. Chancellor of the Exchequer Alistair Darling told British lawmakers that the UK’s budget deficit will hit 611 billion pounds ($990 billion USD) during the next four years. He also said the UK economy would shrink 4.75% in 2010. Earlier in the week Moody’s Investor Service had said that Britain’s finances would “test the Aaa boundaries” of the country’s rating due to rising deficits and debt concerns. Robert Stheeman, CEO of U.K.’s Debt Management Office said a day later that he was “not unduly concerned” about the possibility of a cut in the nation’s credit rating.
Gold Hits Four Week Low
On Friday gold hit a four week low, reversing recent gains as positive US data sent investors in search of riskier assets. Gold prices ranged from $1,143.40 to $1,110.20 the lowest since November 13th. Gold was pressured by the dollar’s rise against the euro and positive US retail sales and consumer sentiment data. The US retail sales report showed the largest advance in US retail sales since August although some attribute the spike to seasonal and holiday buying.
Loonie Pressured by Weaker Gold, Oil Prices
The data pressured the Canadian dollar which fell almost a full cent against the greenback. The US dollar’s rise contributed to weaker gold and oil prices which are key Canadian exports. Steve Butler of Scotia Capital Stated, “It’s starting to look like strong U.S. data is good for the (U.S.) dollar. Certainly the market reacted quickly and bought dollars. The sentiment has turned in favor of the U.S. dollar and Canada’s is weakening off on the back of that.” Investors will be watching for UK Jobless Claims which are expected to be modest and are hoping that UK jobs data will meet optimistic expectations.
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