Investors continue to focus on the possibility of more quantitative easing in the US and less on eurozone debt concerns.

Sterling

Sterling fell to new four-month lows against the euro even though it found support from strong retail sales data. CBI distributive trades rose in September with the survey reaching +49, strongly above the +35 reading seen in August.

US dollar

The US dollar tumbled further reaching new record lows. More weak data supported expectations for more US quantitative easing. The July S&P Case-Shiller home price indicator gave further evidence of soft price pressures. Meanwhile US consumer confidence for September sank to its lowest level since February. Following the weak data the US dollar fell to fresh two-and-a-half-year lows against the Swiss franc, five-month lows against the euro and to its lowest levels against the Japanese yen since Japan’s currency intervention earlier in the month.

Euro

Calls for more quantitative easing in the US are overshadowing concerns over eurozone debt, thus allowing the euro to maintain stronger levels against rival currencies. Yield spreads between German and Irish bonds again rose to record highs. Rating agency, Moody’s, warned of further downgrades this time to Spain which remains the euro area’s fourth largest economy. Despite this the euro moved to new five-month highs against the US dollar. GfK’s German consumer confidence index for October rose above expectations but failed to have much impact on markets.

Japanese yen

The Japanese quarterly Tankan index of sentiment rose by only seven points in Q3, significantly below Q2’s +15 figure as a result of increasing pessimism over future economic prospects. Weaker sentiment among Japanese businesses will add further pressure on the Bank of Japan to not only curb the yen’s rise to support exports, but to also offer further liquidity injections to boost Japan’s economic recovery.

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