Sterling benefitted from better than expected economic data despite a slow start after the long weekend. The sovereign debt story in Europe remains the biggest risk for market sentiment after Fitch downgraded Spain's credit rating to AA- from AAA. Warnings sounded by the European Central Bank about a possible second wave of bank loan write-downs, prompted investors to move into lower yielding, safe haven assets propping up gold, the US dollar and the Japanese yen. The dollar ended mostly higher as growing concerns that Europe's debt troubles were hurting the global recovery kept investors wary of holding riskier assets such as stocks, commodities and currencies like the euro and the Australian and Canadian dollars.

Sterling

Sterling made some really positive movements as it was able to push the euro on the back of better than expected economic data. The main support for the pound was the announcement from UK insurer Prudential who decided to scrap plans to buy AIA, the Asian business of US insurer AIG. Subsequently, the pound rose against the US dollar posting one month highs.

US dollar

The US dollar reached a 15-month high against a basket of currencies, prompted by the continuing fall of the euro. The problems in the Middle East are still a growing concern and these factors are all combining to give the dollar strength as it enjoys its safe haven status.

Euro

The euro fell to a four-year low against the US dollar. Eurozone PMI figures were revised to 55.8, which were just under forecast of 55.9 and had very little impact on currency markets. The news came in between data released from Germany that showed retail sales rising to one per cent. However, equity markets across Europe remain in negative territory, a move reflected across all the major currencies. The weaker broader market sentiment continued to support safe haven flows into the US dollar, Japanese yen and Swiss franc at the euro's expense.

Japanese yen

The Japanese yen fell after Japan's Prime Minister Yukio Hatoyama resigned. Expectations are that his likely successor Finance Minister, Naoto Kan, will take a tougher stance on devaluing the yen.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.