The sell off in equity markets continued in Asia. As a result, safe haven currencies such as the dollar, yen and Swiss franc are seeing gains while the euro is trading at seven-week lows against the US dollar. Equity markets across Europe are called to open lower and weak investor risk appetite will likely drive trade in currency markets yet again.

Sterling

The CIPS PMI service sector survey released and BRC retail sales figures seen in the overnight session are not likely to help sterling. The data continues to reflect a stalling economy headed into this week’s Bank of England MPC meeting. The pound has worked its way down to six-week lows, but sterling’s losses against the rising dollar are not keeping pace with euro/dollar. What this means is that sterling has been able to move to two week highs against the euro.

US Dollar

The yield on the 10-year US Treasury bond fell to lows not seen in five decades. Yields have an inverse relationship with the price, such that lower yields means higher prices are being paid to own Treasuries. Prices are high because demand is high since the 10-year Treasury bonds are considered to be a safe haven for investors and that move into Treasury bonds is seen in the dollar’s gains against most major currencies. US markets were closed for a public holiday and as a result, volumes being traded in currency markets were poor.

Euro

The euro has slipped to seven-week lows against the US dollar. Talks between the IMF, EU and ECB with Athens broke down. The disruption plus concern over funding at European banks lead to a sell off in financial stocks and pushed the euro lower. Weekend elections in Germany saw Angela Merkel’s party continue to lose support. Economic data saw downward revisions to the PMI composite index. A better than expected monthly consumer demand release was no were near strong enough to fight off the negative sentiment that had accumulated.

Japanese yen

The Japanese yen continues to see gains as investors flee risk. Equity markets across Asia continued the sell off which has heightened demand for safe havens, such as the yen.

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

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