Daily currency report

The US dollar advanced and opens at higher levels against most major currencies. The more upbeat news in the US contrasted with the outcome of the EU summit, where leaders agreed in principle over many matters, but failed to take any permanent measures until June. The disappointment over the summit as well as losses over the weekend by ruling parties in France and Germany in local elections could keep selling pressure up on the single currency. In the UK, protests broke out in London over the government’s austerity measures. Protesters fear that the measures will cripple a weak recovery which will be highlighted in the GDP figures.

Sterling

Sterling has made small gains against the euro, but has continued to lose out against the US dollar. Large scale protests were held in London over the weekend as protestors voiced their unhappiness with the government’s austerity measures that they fear will cut off a fragile economic recovery.

US Dollar

The dollar’s gains came on the back of final GDP data. Upwardly revised Q4 GDP figures coincided with less-than-dovish comments on monetary policy by Fed’s members. Investors will await jobs data in the form of an ADP report and the non-farm payrolls release as the FOMC has made it clear that it will not raise rates until a recovery in the jobs market is underway, which is why investors remain focused on jobs data.

Euro

The resilience of the German IFO business sentiment survey helped to keep the euro supported for much of last Friday, but eventually the currency succumbed to selling pressures. Gains will be hard to come by as well with little on the economic agenda to inspire investors back into the euro. Further, over the weekend, there were state elections in France and Germany. In both elections, the ruling government parties of Nicolas Sarkozy and Angela Merkel faired poorly. The news of the defeat comes just on the heels of a political shake up in Portugal, which sparked several ratings downgrades at the end of last week.

Japanese Yen

Movement in the Japanese yen continues to be restricted. Markets held their breath after another earthquake was reported and a tsunami warning announced. Equity markets closed lower, but the yen continues to be trapped in relatively tight ranges due to intervention measures taken by the G7 central banks to halt the speculative rise of the yen.

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