Weak housing data and a fall in a regional manufacturing survey released in the US increased hopes that the Federal Reserve would lend further support to the economy and prompted a rally in stock markets. Investors are looking towards this week’s summit in Wyoming, where last year the head of the Central Bank announced his intention to increase money supply. A string of weak data releases this week and last has heightened hope that Ben Bernanke could repeat last year’s performance and add more liquidity. The heightened expectations will set the markets up for a fall if Mr Bernanke fails to deliver. In the meantime, eurozone flash PMIs were released above market forecast, while German ZEW investor sentiment fell to levels not seen since Lehman Brothers failed. In the UK, sterling could potentially see some follow-through buying after surprisingly strong economic data were released.

Sterling

The CBI industrial trends survey helped lift sterling after the pound had found initial support early in the day when BBA mortgage approvals data improved to a one-year high.

US dollar

The housing market for new homes fell 0.7 per cent, marking a five-month low. The data came with little surprise and therefore had minimal impact on currency markets. A second regional manufacturing index showed a further sign of weakness in the economy. The data does not bode well for upcoming ISM manufacturing figures, which are due out next week.

Euro

Flash estimates of EU PMI surveys for the manufacturing and services sectors helped to lend support to the euro initially, but gains were limited after the release of the German ZEW investor sentiment index. The PMI figures showed that manufacturing had slipped into contraction, but not by as much as had been expected, while the services sector pulled ahead of forecast and remained in expansion territory. The euro was supported on the news as equity markets rallied. However, the release of ZEW investor sentiment plunged and limited gains in the euro.

Japanese yen

Japanese Prime Minister Kan is expected to resign by the end of the week. Moody’s cut Japan’s sovereign debt rating by a notch. The downgrade has had little impact on the yen thus far and is in line with S&P’s rating. The downgrade will remind investors that slow growth coupled with the country’s mounting debt, that is now more than twice its annual GDP, will need to be addressed by the new government.

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

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