Sterling continued to suffer despite an overnight retail sales report from the British Retail Consortium which showed sales improving in August. Recent weak UK data is increasing expectations that the Bank of England may expand its quantitative easing schemes at this week’s policy meeting. Renewed concern over the eurozone’s ability to manage sovereign debt exposures sent the euro tumbling across the board. As a result the euro’s fall also weighed on other riskier currencies and sparked another sharp move back towards safer assets. Safe havens the US dollar, Japanese yen and Swiss franc all found support with the franc moving back towards record lifetime highs against the euro. A US public holiday and little significant data from across Europe meant that the eurozone story dominated trade.

Sterling

Sterling found itself under further pressure, amid speculation that the Bank of England may seriously consider further quantitative easing measures at this week’s policy meeting. Recent weak data has pointed to a sharp slowdown in the UK economy which may require additional stimulus and some analysts believe the Bank of England may do so sooner than expected.

US dollar

The US market was closed for a public holiday, however the US Dollar still managed to post gains against the under pressure euro and sterling. Weak UK data prompted expectations of further quantitative easing, and increased speculation over eurozone sovereign debt exposure helped support safe haven currencies.

Euro

The euro tumbled across the board after the eurozone’s ability to manage sovereign debt was seriously called into question once again. Concerns over the health of eurozone banks and their exposure to government debt resurfaced after media analysis revealed that in recent “stress tests” on 91 of Europe’s largest banks, some lenders failed to provide vital information. There are now serious concerns that these lenders may be over exposed to debt from countries such as Greece and Spain bringing into question the credibility of the tests.

Japanese yen

The Bank of Japan held interest rates overnight and made no change to monetary policy tools designed to stimulate the economy.

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

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