It has broadly been a “risk-on” session today, with Chinese equities closing
up 1.3% (for a second consecutive day). The S&P 500 has risen 2.2% since
last Friday and futures point to a third day of gains today.
This bounce in global risk appetite has fed through to currency markets. The
more risk-sensitive Australian Dollar is up about 0.6% in trade-weighted terms to an eight-session high while conversely the safe-haven Swiss Franc has for the second day running lost ground.
Sterling remains choppy, with little clear directionality. The GBP/USD cross, which had hovered around 1.30 for the past 24 hours, pushed up to 1.306 following the release this morning of upwardly revised composite PMI data for January. The final number for this indicator of UK economic activity was 53.3 – up from a preliminary figure of 52.4 and perhaps more importantly up sharply from 49.3 in December.
The question now is whether this proves to be a short-lived a post general election bounce or a more fundamental recovery in pent-up UK consumer demand and investment. In any case GBP/USD slumped back to 1.30 this afternoon, with the Dollar benefiting from far stronger-than-expected private-sector employment figures for January.
