The economic data agenda for the US, UK and Euro zone is full this week. In addition to the economic data, the European Central Bank will hold its policy setting meeting on Thursday. While investors will be keen to monitor data and the MPC, the events will be overshadowed by developments in Egypt. Protests in Cairo escalated over the weekend prompting safe haven purchases of the Swiss franc, yen and US dollar. As long as geopolitical tensions remain elevated in the Middle East, the downside for these three currencies will remain limited. Additionally, the Chinese New Year is around the corner. With these traders going on holiday, there is risk for the euro downside, since they have been cited as a source of euro demand.

Sterling

Sterling headed lower as safe haven flows picked up on Friday. Not only was sterling facing pressure from a weak GfK consumer confidence reading, but the shift in risk aversion prompted investors to dump the pound in favour of safe havens such as the Swiss franc, yen and US dollar.

US dollar

The US dollar roared to life after Q4 GDP data was released and tensions in the Middle East flared. The combined impact of the data, escalating geopolitical tensions and a glitch in the Nasdaq pricing mechanism, which caused a sharp one per cent fall in the bourse, prompted safe haven flows to pick up and took the dollar higher.

Euro

The media has been filled with stories covering inflation fears. The release of flash HICP is timely and could help to limit the downside for the euro. A pick up in the inflation rate could bring forward the outlook for higher interest rates in Europe and support the euro, particularly since Jean-Claude Trichet’s comments have been on the hawkish side since the ECB’s last policy meeting three weeks ago.

Japanese yen

The Japanese yen was lifted as safe haven purchases picked up on escalating geopolitical tensions in the Middle East. The last release of economic data has not hurt the yen.

Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/

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