News Column

Pound Falls Amid Risk Aversion

July 7, 2014

BRUSSELS (Alliance News) - The British pound weakened against the other major currencies in the European session on Monday amid risk aversion, as European stocks declined following unexpected fall in German industrial production for May.

The benchmark French CAC 40 is currently down 14.70 points or 0.33% at 4,454, the German DAX is down 14.53 points or 0.15% at 9,994 and the UK FTSE 100 is down 15.87 points or 0.23% at 6,850.

German industrial production declined unexpectedly in May at the sharpest pace since April 2012 as geopolitical risks weighed on business confidence and demand, Destatis reported.

Industrial output fell 1.8% in May from the prior month. This was the third consecutive fall and the biggest since April 2012, when output dropped by 2%. Economists had forecast a 0.2% rise in output, after it declined by a revised 0.3% in April.

The pound fell to a 4-day low of 174.71 against the yen, from an early high of 175.23. At last week's close, the pound was trading at 175.12 against the yen. If the pound extends its decline, it is likely to find resistance around the 173.16 area.

The preliminary data from the Cabinet Office showed that Japan's leading index declined for the fourth consecutive month in May. The leading index fell more-than-expected to 105.7 in May, the lowest score since February 2013, from 106.5 in April. The expected reading was 105.9.

Pulling away from an early multi-year high of 0.7913 against the euro, the pound slipped to 0.7933. The pair was quoted at 0.8002 at last week's close. The pound may find support around the 0.84 region.

The survey figures from the think-tank Sentix showed that Eurozone investor sentiment recovered to a more-than-expected figure in July after weakening in the previous two months. The Sentix indicator rose to 10.1 from June's 8.5. Economists had forecast a lower score of 7.7.

The pound which ended last week's deals at 1.7157 against the US dollar dropped to 1.7138. This may be compared to an early high of 1.7166. The pound-greenback pair closed last week's deals at 1.7157. Continuation of bearish trend may lead the pound to a support around the 1.69 mark.

Against the Swiss franc, the pound dropped to 1.5321 from an early multi-year high of 1.5366. The pair was quoted at 1.5340 at last week's close. If the pound extends its decline, it may find support around the 1.51 region.

Switzerland jobless rate remained unchanged in June as widely expected by economists. The seasonally adjusted unemployment rate came in at 3.2% in June, the same rate as seen in May, the State Secretariat for Economic Affairs said.

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Source: Alliance News

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