Sterling shot higher across the board after Q3 growth figures for the UK beat expectations and almost eliminated the possibility of the Bank of England increasing quantitative easing measures this year. For similar reasons, investors reversed negative bets against the US dollar. The Wall Street Journal reported that the US Federal Reserve is likely to introduce a smaller and more measured approach to quantitative easing which is expected to be announced next week. With markets reversing recent bets against the UK and US currencies, the euro crashed as a result, given its sharp rise to record highs over the past few weeks.

Sterling

Sterling produced an incredible u-turn and jumped by over 1.7 per cent against the euro and by over one per cent against the US dollar. The move came after the UK economy received a double boost. Q3 GDP came in at 0.8 per cent, significantly higher than the forecasted slowdown. On the year, GDP rose from 1.7 to 2.8 per cent, its fastest rise in three years. The news will make it very difficult for the Bank of England to increase quantitative easing anytime soon, particularly with inflation running stubbornly high.

US dollar

The US dollar rose after media reports suggested that the Fed will announce plans for a gradual increase in quantitative easing measures. The Wall Street Journal reported that the Fed will use a measured approach towards more Treasury purchases which helped support the US currency.

Euro

The euro tumbled against both the US dollar and sterling with the move driven largely by developments from abroad. The single currency’s sharp rise over the past two months has been driven largely by quantitative easing expectations in both the UK and US economies. However, with these prospects now under serious question, investors were seen cutting short their moves into the euro.

Japanese yen

The Japanese yen crashed by over 1.3 per cent to one-week lows against the US dollar after reaching new 15-year highs just a day earlier. Markets again remain on alert to possible intervention from the Bank of Japan after Japan’s Finance Minister gave strong warnings over the yen’s rise.

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

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