The return of risk appetite?

A return to risk appetite in the markets is likely to mark trading today after the low trading volumes experienced yesterday with both the London and New York markets closed yesterday.

Analysts expect the markets to play ‘catch up’ today as investors have had an opportunity to weigh up last week’s events and, in particular, US Federal Reserve Chairman’s Ben Bernanke’s words about future US policy.

This morning, the Confederation of British Industry (CBI) have reported that the UK consumer services sector has staged a notable turnaround in the three months to May with companies in the sector seeing business volumes rise at their fastest pace since August 2007.

Meanwhile, Bank of England (BoE) policymaker Paul Fisher has said he did not want a US-style quantitative easing programme for the UK as in his opinion, ‘it would be too hard to manage’.

Fisher, a member of the nine strong Monetary Policy Committee (MPC) favours small additional amounts of bond purchases over time as opposed to the US Federal Reserve’s commitment to longer-term stimulus.

Fisher’s comments come after Fed Chairman Ben Bernanke delivered his latest testimony to Congress last week, suggesting the US central bank could begin tapering off its $85 billion monthly bond purchases in the next few meetings. Bernanke also warned that tightening monetary policy too soon could hamper recovery given the high rates of unemployment and government spending.

Analysts await the introduction of Mark Carney on 1 July as the new Governor of the Bank of England to see what effect this will have on policy.

In light trading yesterday, the US dollar continued to lose ground against the other major currencies.