Daily currency report

Overview

Sentiment continues to flip between risk appetite and risk aversion on a daily basis as the last session saw investors tempted back into riskier currencies largely driven by encouraging data from the US. Sterling failed to take advantage of the positive shift in sentiment after disappointing manufacturing and house price data which weighed on the currency, sending it close to one-month lows against the euro and lower against a number of other currencies. US data continue to be the main driver of sentiment and the robust US ISM manufacturing data helped lure investors back into riskier assets. The data offset another weak US ADP Employment report and was enough to send equity markets higher. As a result, safe haven currencies suffered, with the US dollar finding support against the Japanese yen, moving away from recent well-publicised 15-year lows. The Swiss franc fell away from lifetime highs against the euro.

Sterling

Sterling failed to take full advantage of the risk-favouring environment. Weak UK data raised further doubts about the sustainability of the UK economic recovery. As a result sterling fell to just off one-month lows against the euro.

US Dollar

Encouraging data saw the US dollar firm against safe haven rivals Swiss franc and Japanese yen. The US ADP employment report showed jobs falling by 10,000, firmly in negative territory, and below the forecast rise of 19,000. However, some analysts took positives from the news as although employment is falling, it seems to be falling at a slower pace

Euro

The euro moved higher against sterling, found support against the US dollar and pulled away from record lows against the Swiss franc despite mixed data. Eurozone manufacturing PMI rose slightly above expectations. However, it is another piece of evidence showing the continued divide between eurozone economies. Manufacturing sectors in Spain and Italy were seen as contracting while Germany and France continued to grow.

Japanese Yen

Despite the pick-up in risk appetite which saw the safe haven yen suffer against riskier rivals, the Japanese currency found some support overnight. Weak export data from Australia coupled with expectations of another bad jobs figure from the US today is keeping the sustainability of riskier moves hard to come by.

Commercial Foreign Exchange Travelex Malta, freephone: 800 733 22, www.travelex.com/mt/

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