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Risk returned to the currency market with pound producing the biggest gains of the night boosted by the seeming resolution of the political crisis in UK and better than expected RICS data which showed further improvement in the country’s housing market. The euro rallied as well but with much less gusto as German Trade balance figures showed a marked decline in exports in April as higher exchange rates impacted German producers.
Cable was undoubtedly the star of the night rising through the 1.6000 and the 1.6100 handles on a relief rally after Gordon Brown managed to survive the Labor party meeting and maintain his leadership role. David Miliband, the Foreign Secretary stated that, “The Labor Party does not want a new leader, there is no vacancy, there is no challenger. The leading contender, Alan Johnson, is backing the Prime Minister to the hilt. So that is that.”
Mr. Brown will still have to contend with Labor’s sagging approval ratings and calls for an early election as he reshuffles his cabinet, but at least for the time being a sense of calm returned to UK politics and the pound benefited mightily from the short covering rally that ensued. Sterling was also boosted by better than expected RICS data which improved to -44% - the best reading since December 2007 – as prices in UK housing market continued to stabilize.
Source: Fx360.com