Pound stays strong with euro in the doldrums

Sterling remains camped close to its strongest level in seventeen months against the euro to start Wednesday. At the same time, a less constructive environment for the US dollar saw the pound pick up close to a cent at its expense, while the euro was also able to regain some ground after a sticky period.

France was the catalyst for the recent euro weakness, so the sight of more stable government borrowing costs brough a little respite to the eurozone. However, the rapid swings in currencies and bonds in recent days suggests the present uncertainty isn’t going away any time soon.

Despite all the turmoil in bond markets, the S&P 500 hit a record high yesterday thanks to the overperformance of a handful of tech stocks. The lack of breadth (i.e. the concentration of the strong performance among only a few names) is causing some concern ahead of a busy corporate earnings season set to kick off in the next couple of weeks.

UK construction firms reported optimism for the year ahead in S&P’s monthly market survey. Although output fell in September, the below-neutral score of 46.1 marked the slowest pace of decline since January, even as new orders slowed and the impact of the Iran War continued to work its way through the sector.

Today’s big event will likely come after the markets have shut in Europe. The latest FOMC minutes from the Federal Reserve should provide another steer on the path for interest rates in the medium term, which could have a dramatic impact on the US dollar by the time Thursday morning roles around.

In other currency news, the Japanese yen is also under a little pressure this morning after a newly appointed board member at the Bank of Japan signalled his preference for a gradual approach to increasing interest rates. The Aussie dollar has traded more or less sideways against its rivals this week with more important data due out the other side of the weekend.