Daily currency report

Sterling is facing selling pressure against both the euro and the dollar in line with this increased risk aversion as the local currency also continues to be weighed by concerns over the growing budget deficit and state of public finances.

Sterling

The pound continues to be weighed by concerns over the growing budget deficit and worrying state of public finances as official figures have revealed. Falling stock markets have increased safe haven demand causing weakness against the greenback while continuing optimism that the worst of the recession is over in the eurozone while the UK seems to be stalling in its recovery is still lending the single currency support against sterling.

US dollar

The currency markets continue to be swayed by sentiment and the dollar may find several sources to offer safe haven support. Weaker equity markets in Asia seem likely to spill over to markets in Europe and decrease investors risk appetite. A poor opening on Wall Street will only accelerate any such safe haven inflows. Comments from US bank Sun Trust which have highlighted ongoing credit losses and the US budget deficit revisions are likely to encourage further risk aversion in the short term.

Euro

Euro gains against the dollar came to a halt as investors took profits following four days of gains for the single currency. Regardless, the euro remains well supported against most of its major rivals after an upside surprise to the eurozone's industrial orders for June.

Japanese yen

The yen fell close to a one week lows against the dollar as positive mood in the markets weakened the Japanese currency. The improved global outlook had lead investors to sell the yen in favour of higher yielding rivals but this trend was reversed later as Asian equity markets faltered and safe haven inflows returned.