The euro managed to recover after Ireland agreed to discuss its finances with officials from the EU and International Monetary Fund. After dragging its feet for so long in order to protect its credibility, Ireland risked allowing countries such as Spain and Portugal to be dragged into the sovereign debt storm. The news was a step in the right direction and the single currency immediately benefited. A rising euro pressured sterling into surrendering recent gains despite encouraging news from the UK. Surprisingly, the US dollar suffered from disappointing local data which not only supported the US Federal Reserve’s decision to expand quantitative easing measures, but also eased speculation that the Fed may not need to completely utilise its $600 billion stimulus pledge.
Sterling
In a volatile trading environment, sterling is finding it difficult to push past key levels against its main rivals. Despite encouraging news, the pound fell under pressure from the euro. Minutes from the Bank of England’s November policy meeting earlier this month revealed no surprises.
US dollar
Weak economic data releases not only supported the US Federal Reserve’s decision to expand quantitative easing measures, but also eased speculation that the Fed may not need to completely utilise its $600b pledge. As a result, the US dollar fell across the board although the greenback still remains within sight of multi-week highs against rivals such as sterling and the euro.
Euro
The euro managed a small recovery after confirmation that Ireland is prepared to discuss the country’s dire finances and possibly seek help. EU and International Monetary Fund officials will run the rule over Ireland’s books as they head for Dublin. This could possibly result in a Greece-like bailout for the troubled nation. Ireland succumbed to growing pressure from EU members after earlier announcing that it was planning to pump a further €50 billion into its failing banking sector. However, following emergency talks, Ireland may now be forced to undergo harsh restructuring if it fails to assure all parties that current risks are manageable. Any action which could help shore up falling confidence in European financial markets should be positive for the euro in the short-term. However, as contagion spreads to Portugal and Spain, the euro may continue to suffer.
Japanese yen
The yen remained on the sidelines as investors’ eye tonight’s release of the Bank of Japan’s October meeting minutes. Another concerning outlook on the economy could prompt local investors to minimise risky bets which would support the yen.
Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/