Daily currency report

Stock markets and the euro bounced as Italian Prime Minister, Silvio Berlusconi, finally agreed to resign after his government won a vote on a budget report, but failed to secure a majority as confidence in his leadership plummets. Despite the single currency’s climb though, it immediately ran into strong technical resistance suggesting investors fear Rome may not be able to pull through a period of low growth and high debt without outside financial support. Therefore, sterling maintained its bullish tone against the euro after manufacturing data provided a little hope for the UK economy and more worrying comments from Swiss authorities encouraged safe haven diversification out of the franc and into other liquid currencies. The defensive US dollar, despite slipping on the markets slightly improved tone, is back on the front foot again with investors still worried the eurozone debt crisis still has some way to go yet.

Sterling

Sterling little changed with the majority of major currency crosses moving almost sideward as investors appear to have lost direction in the midst of so many conflicting headlines over the past few days. UK economic data were more or less overlooked in favour of Italian politics although there were a few signs of optimism for the British economy.

US Dollar

The US dollar immediately fell as investors nervously took on risky trades after Italian Chief, Silvio Berlusconi, finally offered his resignation. The news encouraged traders out of refuge dollar positions and into stocks and more risky currencies. However, the move seems to have been short-lived and the dollar is back on the front foot.

Euro

Italian Prime Minister, Silvio Berlusconi, finally agreed to step aside and resign after his government won a vote on a budget report, but failed to secure a majority as confidence in his leadership plummets. However, Mr Berlusconi will only hand over power once the austerity measures he had promised France and Germany have become law which could still leave Italy under his leadership until December. Regardless, markets reacted positively to the news with equity markets and the euro rising on hope that Italy maybe better equipped to avoid a Greece-like crisis under a prime minister not caught up in so much controversy. Despite the single currency’s climb though, it immediately ran into strong technical resistance which suggests that investors still fear the worst in yet to come for the eurozone.

Japanese Yen

Rallying stocks and appetite for risk failed to weaken the yen by any substantial amount leaving the door widely open for more yen-selling intervention from the Japanese government.

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