Signs of slowdown in the UK’s economic recovery pushed sterling down against most of its major rivals, leaving the euro in particular as the main benefactor of investor demand. The US dollar rallied as traders were swayed by its safe haven status following further poor economic data. Elsewhere, the Japanese yen relied heavily on its safe haven appeal in the wake of further poor economic data, resulting in seven-month highs against its US dollar counterpart.

Sterling

Sterling fell across the board as fears of a global “double-dip” recession gripped markets. On a quiet day in terms of UK data releases, the pound was affected by a continuous string of poor US data encouraging a switch in market sentiment to investing in safer currencies such as the Japanese yen and the greenback.

US dollar

The heavy selling pressures endured by the greenback began to slow as risk aversion kicked in and traders were drawn to the dollar’s safe haven status. Despite minimal data releases, US consumer confidence data dropped significantly from the two-year highs of 76.0 seen in June to 66.0 in July. Consumer expectations also fell to lows not seen since March 2009, triggering fears over the possibility of a “double-dip” recession in a period of high US unemployment.

Euro

The single currency enjoyed a fruitful week as successful debt auctions in Spain, France and Greece helped to lift the recent doom and gloom surrounding the economic health of the eurozone. Furthermore, the news regarding the stress testing of 91 European banks was seen as a positive move by economists who see this as Europe’s chance to prove the stability of their banking system.

Japanese yen

The Japanese yen was the main benefactor of safe haven appeal allowing it to move to near 2010 highs against its rival greenback. A string of poor US data encouraged traders to take longer positions in the Japanese currency, particularly following the news that the University of Michigan’s consumer confidence index dropped unexpectedly to levels not seen since August last year.

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