U.K.’s sterling that declined sharply against other major currencies at 2:55 am ET Wednesday rebounded shortly as most European stock markets opened in a positive territory. The pound reached multi-day highs against the currencies of U.S, Europe and Switzerland.
Traders await the Bank of England’s July meeting minutes at 4:30 am ET. At the meeting, the Bank of England retained its key interest rate at a record low of 0.5% and maintained the size of asset purchase scheme at GBP 200 billion.
On the equity front, U.K.’s FTSE 100 Index is currently up 1.53% or 78.66 at 5,217.99, France’s CAC 40 is trading higher at 1.59% or 55.02 points to 3524.62 and Germany’s DAX is currently up 1.39% or 83.22 points to 6049.84.
The pound rose to a 2-day high of 1.5337 against the US dollar around 3:55 am ET and the next likely resistance level for the pair is seen at 1.5490. The cable closed yesterday’s deals at 1.5264 against the dollar.
The UK currency that reached as low as 132.38 against the yen around 2:55 am ET reversed its direction thereafter and is currently quoted at 133.62. The pair closed yesterday’s deals at 133.59.
The Japanese government said today that the economy is picking up steadily, although it faces a difficult situation such as high unemployment rate.
In its monthly economic report, the Cabinet Office said despite the severe labor market situation, the economy is expected to be headed for a self-sustaining recovery as corporate profits continue to improve.
At the same time, the deputy governor of the Bank of Japan Hirohide Yamaguchi said today that the central bank will not rule out further easing measures to strengthen the country’s economic recovery and overcome deflation.
Earlier, the minutes from the Bank of Japan’s June meeting showed that the board members remained wary of the fiscal problems that continue to plague Europe.
The members also felt that the Japanese economy may face downside risks later this fiscal year, the minutes showed, as volatility in the stock market may weigh on consumption.
The pound climbed to a 5-day high of 0.8421 against the euro around 3:55 am ET, compared to yesterday’s close of 0.8441. The euro-pound pair is presently worth 0.8420 with 0.8320 seen as the next likely target level.
Investors remained cautious ahead of the European bank stress-test results, which are due to be released on Friday and the euro may come under pressure if the European banks need to raise substantial new capital.
The pound that jumped to a 5-day high of 1.6118 against the Swiss franc around 1:10 am ET reversed its direction and hit as low as 1.6001 before bouncing back again around 3:00 am ET. The pound-franc pair is presently quoted at 1.6094.
The Swiss National Bank said today that it expects CHF 4 billion loss on huge euro-denominated investments in the first half of this year. Further, the SNB noted that the sharp appreciation of the Swiss franc, in particular against the euro, resulted in exchange rate losses of over CHF 14 billion.
In a statement, the central bank said it has increased its foreign currency investments by some CHF 132 billion in the first half of 2010, with the bulk placed in euro-denominated investments. It noted that the income from foreign currency and Swiss franc positions and the steep rise in the price of gold limited the extent of loss to an estimated CHF 4 billion.
Turning to the North American session, the U.S. Federal Reserve Chairman Ben Bernanke will testify on monetary policy before the Senate Banking Committee and table the semi-annual monetary policy at 10 am ET.