The US dollar index opened near one-month lows as weak economic data released at the end of last week continues to weigh on the dollar. Soft job creation figures supported the view that the Federal Reserve would maintain its ultra-loose monetary policy for the foreseeable future, which stood in contrast to the European Central Bank’s policy outlook which is seen ramping up its hawkish rhetoric at this week’s policy meeting, providing support to the euro. The Bank of England is widely expected to leave interest rates on hold when it meets this week to discuss monetary policy.

Sterling

Sterling was knocked lower after soft manufacturing and service sector surveys provided further evidence that the UK economy was entering a soft patch. The weaker than expected economic data coupled with dovish comments from one MPC member in front of the Bank of England MPC meeting weakened sterling mid-week. The contrasting outlook for monetary policy between the central bank in the UK and the ECB helped to push sterling to near one month lows against the euro.

US dollar

The US dollar fell after non-farm payrolls showed companies hiring the lowest amount of workers in the past eight months. Non-farm payrolls figures that came in well below market forecast at 54,000, showed that job creation had slowed considerably and supported the view that monetary policy will continue to remain loose. In addition to weak job creation, the rate of unemployment rose to 9.1 per cent.

Euro

The euro has been pushed higher by two positive developments. First the Portuguese elections held over the weekend put an end to months of political uncertainty and, second, markets are convinced that Greece is going to be able to secure another bailout package, allowing the country the possibility of avoiding default.

Japanese yen

The Japanese yen pushed higher against the US dollar and sterling towards the end of last week, while the euro was able to make gains against the yen. The yen continues to face political instability issues which will limit its upside potential.

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

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