There was a massive euro sell off as sentiment surrounding the single currency plummeted as protests in Athens turned violent and the Prime Minister announced that he would create a new government and hold an immediate vote of confidence. At the same time, a breakdown in negotiations between Germany and the European Central Bank has also weighed on sentiment. The reversal of sentiment was further supported by US economic data that did not bode well for an economic recovery. Inflation figures came in at three year highs and growth figures weakened. In the UK, data showed mixed results for the employment market and had only a mildly negative impact on sterling.

Sterling

Sterling went from being the “main focus” for currency markets to being a ‘sideshow’. Sterling managed to trade through the slightly higher claimant count and ILO unemployment rate that held steady at 7.7 per cent. Average earnings were benign much to the relief of the central bank and participants were sitting on the sidelines awaiting for retail sales figures. The sell-off in euro/dollar allowed for sterling gains against the euro, but the force of dollar buying was too much for the pound to hold its position.

US dollar

The dollar index hit a three week high as the sell off in euro continued. The sell off was sparked by a sudden urge to get out of long euro positions as the outlook for a successful finish to the Greek debt crisis crumbled. The exodus from the euro and into the dollar increased when economic data in the US showed higher than expected inflation, which was seen as eating into consumers’ purchasing power coupled with weak growth figures.

Euro

The way forward for the Greek debt crisis is being fought on two fronts. First, the Greeks have to agree to a way forward and second, the EU, IMF, and ECB must come together and find a solution for a second bailout package.

Japanese yen

The yen has made gains against most major currencies as investors were seen fleeing into safe haven currencies. Equity markets across Asia are trading sharply lower and are supporting the push back into the yen.

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

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