Equity markets are expected to open lower across Europe, which will likely influence currency markets that are waiting for the outcome of the policy meetings at the Bank of England and European Central Bank. The US dollar sank further after comments from a Chinese official, Federal Reserve’s Fed Bernanke and President Barack Obama. While the dollar continues to face downside pressures, the euro is finding further gains difficult to come by.

Sterling

The pound will follow euro/dollar developments, while against the euro sterling is expected to remain near one-month lows in front of the Bank of England and European Central Bank policy meetings.

US dollar

The US dollar dropped on an index basis to one month lows after a Chinese official made personal comments on his view of where the dollar could go by saying that it was not interesting to hold “excessive” dollar assets. Comments from US officials later in the day also proved to be negative for the dollar. The chairman of the Federal Reserve Ben Bernanke did not offer anything new; while acknowledging a dip in economic data and a weak jobs report, he seemed more concerned about warning Congress against steep spending cuts. The comments suggest that the Fed is no closer to tightening monetary policy then before and will continue to keep rates at an ultra-low level for an “extended period”. His comments were echoed in remarks by President Obama who said he will consider extending stimulus measures.

Euro

The euro is finding it difficult to make stronger gains in front of the ECB meeting. The anticipated hawkish nature of Jean-Claude Trichet at the press conference is helping to lift the euro while economic data released did not stand in the Euro’s way.

Japanese yen

The Japanese yen is strengthening, a drop in equity markets and good economic data are helping investors move back into the yen. The yen stands to gain as a safe haven when equity markets fall and economic data showed a recovery from March’s disaster may not be far off.

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

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