Sterling drops over 1% in one day
There was no particular poor data yesterday that caused the big drops for Sterling. Traders cited year end clearer selling while thin liquidity exaggerated price movements."Sterling has seen quite a move but it has all been down to selling by a particular clearer," said Neil Mellor, currency strategist at Bank of New York Mellon.
He said a fragile UK economy was weighing on sterling sentiment, with investors concerned about the negative impact of the government's planned austerity measures.
"The fact that sterling has not derived a huge benefit from the weakness in the euro (due to the euro zone debt crisis) speaks about a limited appetite for sterling. If it can't benefit against the euro now it's unlikely to going forward."
This is a good point. The Euro is as weak as can be at the moment due to all the debt problems, and if Sterling is struggling to make gains against such a weak currency, there is little hope as we go into next year for those needing to buy Euros.
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Daily market reports will start again on Tuesday the 3rd, so check back then to find out where exchange rates are headed in 2011.
A very happy and prosperous new year to all our regular readers.
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