UK Pound Gains as Forex Traders Dial Back the Euphoria

Last week, Forex traders showed a great deal of euphoria over developments in Europe and in the United States. Germany’s tacit agreement to the ESM, along with the announcement from the Fed that QE3 would start in the United States, pushed markets higher. Now, though, investors and traders are taking stock and the dynamic has changed a bit.

Instead of favoring the eurozone and the single currency, the new state of affairs favors other currencies. The UK pound is heading higher today, gaining against the US dollar on a bit of risk appetite, and gaining against the euro as focus shifts away from what the ECB can do to what politicians in embattled countries will do. Spanish leaders have been reluctant to take a bailout, since citizens are protesting against austerity. This is bringing up troubles for the euro, and helping the pound.