The ebb and flow of risk appetite over the past few days has continued to confuse markets as the major currencies continue to trade in fairly well defined ranges.

China's export recovery will undoubtedly lead to pressure on rates after the February figures released today showed a rise by more than economists expected, and increased fears that the Chinese authorities may continue paring back stimulus measures and raise rates as soon as this month to head off inflationary pressures building in the economy.

 

The pound was hit by yesterday's increase in Britain's trade deficit in January which surprised the market and sent the pound tumbling. Data from the office for National Statistics showed the UK's deficit on trade in goods widened to £7.99bn from £7.01bn the previous month, about £1bn more than economists had predicted, though given the recent propensity for economists to get it wrong, it really wasn't that much of a surprise. It also casts doubt on the often repeated argument that a lower pound would boost exports.

The pound was dealt a further blow when Fitch ratings criticised the credibility of the Government's budget plans, warning that Britain risks a loss of investor confidence and erosion of its "AAA" rating unless it maps out clear austerity measures.

 

Meanwhile the Euro had been starting to regain some ground after IMF chief Dominic Strauss-Kahn said "there's no reason" to expect that Spain and Portugal would need external support.

The markets are yet to be convinced of that let alone the ability of the Greeks to be able to sort out their debt problems, and it seems that Fitch also has doubts about whether Greece can deliver on its austerity plans, once the pain starts to bite. With dissent already appearing in the Greek cabinet there is no guarantee that the Greek government will be able to implement their plans over the next few months and years. The ambiguity by the EU with respect to a bail-out for Greece while buying some time will not assuage the markets concerns indefinitely.

 

It is still hoped that today's UK industrial production and manufacturing data figures will continue to show month on month increases after December's positive numbers. Industrial production is expected to show an increase of 0.3% while manufacturing production an increase of 0.2%.

GBP/USD - Yesterday's poor UK trade data and comments by Fitch have continued to weigh on the pound in the last 24 hours. Support can be found at yesterday's lows around 1.4930; however the key level on a daily close remains 1.4850 which is the 61.8% Fibonacci Retracement of the up move from 1.3500 to 1.7045. A break below here would re-target 1.4400, the 22nd April 2009 lows. Resistance can be found at 1.5020 in the short term.

EUR/GBP - the November and December 2009 highs at 0.9150 are the key barriers to further Euro upside here. Last week's rally stalled at this level and remains the key barrier to further sterling losses. Euro dips should find some buyers around 0.8980 and 0.9020.

EUR/USD - the Euro continues to trade in a broad range between the key downside support at 1.3485 on a daily close and the recent highs around 1.3700. The trend line resistance from the 1.5145 highs continues to weigh down on the market with the resistance now at 1.3820.

USD/JPY - the yen has weakened slightly over the past few days finding resistance at the 90.70 resistance. The key resistance level remains at the 200 day MA at 91.90 while it should find support around the 89.30 area which is the bottom of the cloud.

To avoid taking a gamble in this fast moving market why not secure a good rate today. Our forward rate services, allow you to lock in impeccable exchange rates for up to a year ahead requiring only a 10% DEPOSIT, and no more worry? (Please note this rate may be different from the SPOT rate)