Sterling To US Dollar Rate Spirals Following Strong US Consumer Confidence Data

Published: Wednesday, 29 February 2012 09:00 BST - Written by John Cameron

STORY LINK Sterling To US Dollar Rate Spirals Following Strong US Consumer Confidence Data

The Pound to US Dollar exchange rate is 1.5927, while the Pound to Australian Dollar exchange rate is 1.4731.

Yesterday afternoon’s session in the currency markets was marked by more better than anticipated data from the US; February’s Consumer Confidence figure thrashed expectations of a 63.0 result to print at 70.8 – massively up from January’s 61.5 figure.

The US sentiment survey result is the latest in a succession of data releases which suggest that the world’s largest economy is displaying green shoots of recovery. Predictably, the positive US data caused an uptick in global appetite for risk late yesterday. This saw Chicago’s benchmark S&P 500 share index close up by over a third of a percentage point. The scaling back of risk aversion had the additional effect of weakening the safe-haven US Dollar, sending the GBP USD exchange rate to 1.5938 in early trading today. A renewed run at the key 1.6000 level now looks likely.

Meanwhile, today is LTRO day in the eurozone. LTRO is an acronym for Long Term Refinancing Operation and given the region’s ongoing debt woes, it takes on particular significance this month. Analysts anticipate that the European Central Bank will make available some €450bn of new liquidity available to eurozone banks later today, however market whispers suggest that this figure may be over €500bn. If these rumours prove to be correct, then the ECB’s action could herald the return of full-tilt ‘risk-on’ trading, which would likely see the GBP USD exchange rate rapidly climb back into the 1.6000s, while the GBP AUD rate would head downwards once again, with the distinct possibility of a break down to a new 27-year low.

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