Daily currency report

The US government reached a budget deal on Saturday avoiding a shutdown. The deal incorporates $38bn worth of spending cuts. The news is dollar supportive. Further, the price of oil could be impacted by a possible peace plan in Libya. Gaddafi has said that he will accept the plan offered by the African Union. Rebel leaders have yet to agree, but the talk of peace could help ease oil prices and help lift the dollar. There are also some economic figures due out this week, which could provide the dollar with support, but dollar gains will likely be limited by another deadline that is looming. Sterling could find some support on the back of hawkish comments made over the weekend while in the eurozone, there is very little on this week’s agenda, but with the European Central Bank rate meeting out of the way, it could open the way for markets to refocus attention onto the debt crisis and allow for some euro weakness.

Sterling

Sterling could see some more gains in front of this week’s data and on the back of hawkish comments from Bank of England’s Andrew Sentance. Mr Sentance said that interest rates should gradually rise to help stave off the threat of future inflation.

US Dollar

The US dollar opens at lower levels than were seen at the end of last week. The dollar fell under selling pressure at the end of last week for a variety of reasons. The higher oil price, the threat of government shutdown and the outlook for loose monetary policy have all weighed on the dollar. The price of oil might see some relief, as Libya peace talks have gotten underway with Muammar Gaddafi already accepting a peace plan by the African Union, who will now try to negotiate with rebel leaders.

Euro

The euro continues to trade higher despite the ongoing debacle in the peripheral countries. German trade figures showed exports rising stronger than expected indicating that a strong industrial led economic recovery is continuing. The ECB’s interest rate increase last week also helped to provide support for the euro.

Japanese Yen

The Japanese yen has opened higher on the back of profit taking. The yen had fallen to 11-month lows against the euro and two-and-the-half-year lows against the Aussie dollar. The move comes despite weak economic data and political uncertainty that increased over the weekend.

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