A strong result in US durable goods data was encouraging. Markets responded accordingly with a sell-off in gold and other safe havens, while the dollar actually traded off its lows against the euro. The euro was left unscathed by the weak release of IFO business sentiment. An announcement made by France that it was unveiling austerity measures for this and next year could help stabilise European bank overnight funding which has, however, become strained in recent days. In the UK, a CBI distributive trades survey will be released. Earlier in the week a surprisingly strong CBI industrial trends survey was seen, but a similar surprise is really not expected since retailers started heavy discounting early this year.

Sterling

Nationwide consumer confidence slipped to +49 from +51 in the month of July. The drop in consumer confidence to three-month lows could negatively impact sterling, but whatever impact it has on the currency, it will likely be temporary in front of the CBI distributive trades report.

US dollar

The better-than-expected rise in durable goods orders prompted investors to become increasingly confident that the US economy might be able to avoid a double dip recession. However, the durable goods figure could potentially be a false hope. While the headline release was up four per cent, the reason behind the rise was largely due to stronger orders of airplanes and automobiles. Stripping out the transportation orders, the figure actually fell 1.5 per cent and it is this gauge that is seen as a barometer for business spending.

Euro

The German IFO business sentiment survey dropped to a 14-month low while industrial new orders for the eurozone fell -0.7 per cent from a prior month’s +3.6 per cent release. The weaker economic data did not stop the euro from strengthening. After a quick move lower, investors traded past the data and bid the euro higher as they looked towards the speech from Fed’s Bernanke.

Japanese yen

The Japanese yen saw shockingly little reaction to the Bank of Japan’s new facility announced. The facility was created to help provide liquidity to the sagging economy, while at the same time offering a deterrent for yen strength. Today, the yen is trading lower largely on the back of improved equity markets, which has reduced the need for safe havens.

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

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