Of the major currencies it has been the proud pound that has been leading the way so far this year. Following yesterday's less dovish MPC Minutes and the surprisingly strong employment figures, cable is back through 1.60 once more and EUR/GBP is at a 20mth low of 0.8180. Against the Japanese yen the pound has advanced by almost 10% so far this year. Numerous explanations account for this more buoyant performance: the pound is very competitive, many sovereign wealth funds and high net worth individuals are still spooked by the euro (see below) and regard UK assets (such as London property and gilts) as safe-havens, and the economy appears to have avoided falling back into recession. In addition, other major currencies such as the Japanese yen, the Australian dollar and the Swiss franc are regarded as being very expensive, so it is little wonder that sterling is on the radar of money managers. Looking ahead, these sources of demand are likely to remain evident for some time to come. The message for a while now has been 'do not underestimate the pound'.
Also in today's Daily Forex Brief:
- UK QE loses its biggest sponsor
- Spain goes back to its roots
- Reserve managers snub their nose at the euro
- Yen softens amidst talk of more BoJ easing