Daily currency report

Eurozone jitters saw the euro fall sharply with European bond market activity reminding investors that Italy may just be the next victim of the sovereign debt disease plaguing the euro area. Coming on the heels of a warning from rating agency Fitch, markets demanded record premiums as Italian government debt yields rose to an 11-year high. The news provided the US dollar with some respite although the currency remains in decline against key safe haven rivals the Swiss franc and Japanese yen breaking fresh four-month lows against its Japanese counterpart. Euro weakness also presented sterling with a boost although the pound’s fall to an all-time low against the New Zealand shows the British currency is falling quickly out of favour.

Sterling

Although the pound managed to break through key psychological highs on the euro and gain on more riskier rivals largely on Italian government debt fears, sterling’s demise to a record all-time low against the New Zealand dollar paints a more accurate account of sentiment towards the British currency.

US dollar

The dollar remains in decline against key safe haven rivals the Swiss franc and Japanese yen breaking fresh four-month lows against its Japanese counterpart. The scheduled vote on a Republican plan on how to raise the country’s borrowing limit was cancelled after members within the Republican group refused to back the proposal. The situation is becoming more desperate and if the US debt ceiling is not raised along with new deficit cutting measures by next Tuesday, markets know the consequences could be catastrophic.

Euro

Eurozone government debt jitters along with declining sentiment saw the euro fall further against the US dollar and UK pound while almost clocking a new all-time low against the Swiss franc. This month’s economic sentiment index for the euro area tumbled more than expected highlighting the growing uncertainty creeping into business activity.

Japanese yen

Markets analysed several key economic data releases from the Japanese economy which on the balance added more to widespread concerns over the stronger yen. Consumer price inflation fell below expectations as Japan continues with its battle against deflationary pressures while unemployment also picked up in June.

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