The euro opens on the back of its first weekly gain against the US dollar since the beginning of November. Strong retail sales data coupled with falling bond yield spreads within the eurozone renewed market appetite for the euro. Adding to the currency’s allure were unemployment fears in the US, which drove investors out of the greenback on speculation that the US Fed’s recent $600b quantitative easing injection could yet be expanded. Comments from Ben Bernanke later confirmed that further quantitative easing still remains a possibility as the dollar tumbled across the board. The yen and Swiss franc surged to three-week highs and sterling too found support against the greenback despite disappointing UK service sector data. Despite the tables turning towards the end of last week, the euro is still at risk from euro zone sovereign debt concerns which remain far from resolved.
Sterling
Sterling climbed by over 1.3 per cent against the US dollar during trade, after disappointing US jobs data renewed speculation over the US Federal Reserves contentious quantitative easing program. However, as eurozone worries eased and the euro again found support, sterling fell to over one-and-a-half-week lows against the single currency.
US dollar
The US dollar fell sharply after US unemployment reminded markets of how fragile the economic recovery is. The dollar fell to three-week lows against the yen and Swiss franc, hurt by November’s Non-Farm payrolls data which fell some way short of expectations.
Euro
Eurozone October retail sales and November’s service sector PMI both surpassed expectations, suggesting that the euro area’s recovery is on a more stable footing than many other rival economies such as the UK and US. However, of more interest to investors was bond market activity and the European Central Bank were reported to have snapped up a record amount of peripheral eurozone debt last week. Evidence of the central bank’s relentless efforts to stabilise financial markets was seen in yield spreads between peripheral government bonds and benchmark German bonds which narrowed further. Although contagion fears have eased, the crisis is far from over as Ireland will attempt to pass crippling budget measures for 2011.
Japanese yen
Renewed economic fears in the US, ongoing tensions in the Korean peninsula and euro zone sovereign debt worries, all combined to send the yen soaring to three-week highs against the US dollar. Despite a pick-up in risk appetite towards the end of last week, global uncertainties are keeping investors leaning towards safer assets such as the yen and Swiss franc.
Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/