The Pound tumbled after credit rating agency Moody’s warned that it could downgrade its investment rating on 14 UK banks. Greece is being pushed to implement new austerity measures which is creating another split between government officials, while unions are threatening to strike against further cuts. The euro did find mild support after the IFO survey of business sentiment held steady in May suggesting the zone’s largest economy will continue to drive growth in the area. Nervous stock markets and eurozone jitters added to the US dollar’s allure as a safe harbour, allowing the greenback to build on record high levels. The dollar is finding further support as investors shun the Japanese yen following news of Japan posting its first trade deficit for the month of April in 31 years.

Sterling

Sterling tumbled to a seven-week low against the US dollar after credit rating agency Moody’s warned that it could downgrade its investment rating on as many as 14 UK banks. The agency fears that the banks are facing deteriorating balance sheets as the UK economic recovery continues to stall. Exacerbating the fall for the pound was public sector borrowing figures rising to £7.71 billion, a record amount for the month of April.

US dollar

The US dollar continues to trade near March highs against the euro as European debt jitters continue to spook investors. Nervous stock markets also added to the dollar’s allure as a safe harbour and after rating agency Moody’s warned against UK banks, the greenback also posted fresh multi-week highs against the British pound.

Euro

The euro remains under heavy scrutiny as sovereign debt troubles continue to plague peripheral eurozone nations. The Greek economy is again on its knees and a likely restructuring of its debt obligations could have a detrimental effect on other fiscally strapped nations and may drag on core economies such as Italy and Spain. Greece is being pushed to implement new austerity measures which have created another split between government officials while unions are threatening to strike. Consequently, the single currency should remain under pressure, possibly testing further lows versus the US dollar.

Japanese yen

Japan posted its first trade deficit for the month of April in 31 years as exports continue to suffer in the aftermath of recent earthquake disasters. The bigger than expected drop in economic activity is surprising markets and with the economy already suffering from its third recession in a decade, the Bank of Japan is likely to adopt an extremely loose monetary policy for some time to come.

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

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