Sterling and the Euro at stalemate as both currencies seek the upper hand

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There has been plenty of movement in the foreign currency exchange markets over the last 24 hours however, we are no closer to either side gaining momentum in the FX markets. For Sterling and the Euro, it has been a struggle just to hold onto previous gains against the US Dollar as the changing political and economic situations are all weighing heavily on both currencies against the more robust US economy.

In the battle for supremacy between Sterling and the Euro there is no clear winner either, with some economists suggesting the Euro has strengthened too much which is unsustainable. The data and surveys released over the past few days have done little make the picture clearer. Even the confidence investors had in the upcoming Bank of England and European Central Bank seems to be ebbing away. All in all, there is little direction in foreign exchange markets, with the markets waiting to be led by events. 

Away from the Euro, Sterling managed to pick up a cent against the Swiss Franc and two Japanese Yen as investors moved back towards riskier currencies which saw Sterling struggle against the Australian, Canadian and New Zealand dollars. 

Crucially, the UK economic statistics that came out on Tuesday morning created no new difficulties for Sterling. Mortgage approvals were higher than expected in February, net lending to individuals rose by £2 billion, nearly twice the forecast increase. More importantly, UK gross domestic product (GDP) growth in the fourth quarter was also revised higher. The revision from -0.6% to -0.5% wasn't enough to garner a positive reaction by Sterling, but at least it was an adjustment in the right direction.

In the US, consumer confidence slipped to 63.4 from 72.0 while the index of US house prices fell by -3.1% in the year to January. In New Zealand, building permits slumped by a monthly -9.7%, continuing their downward trend. 

Today's UK CBI distributive trades survey provides the first clue as to whether March sales were as dire as those in February. In the Eurozone figures for industrial, economic and consumer confidence seldom make any waves and nothing ground breaking is expected. 

The only piece of data that could get things moving is the ADP's employment change figure from the US, because it provides a pointer to how Friday's US non-farm payrolls number might pan out.

Overall, Sterling starts the day in substantially better form than could be expected however, it remains to be seen whether the upturn represents a new-found confidence in Sterling or if it is the onset of a new realism about the situation in Euroland.