Sterling fell to six-week lows against the US dollar despite encouraging public borrowing figures. The move reflects concern the Bank of England may signal its intent to print yet more money in order to safeguard UK growth. With one eye on the release of minutes to the Bank of England monetary policy committee’s November meeting, markets will also study several key reports on eurozone economic activity. PMI measures of manufacturing and service sector activity across the shared currency area are likely to elevate fears of a recession. Pressure on the European Central Bank to cut interest rates again is growing, which could mean further euro weakness, and even more so after dire consumer confidence data. The most obvious beneficiary should, of course, be the US dollar which is already on the front foot after weaker than expected US growth data hit market sentiment.
Sterling
Since peaking at over two-month highs on November 10, the pound’s trade weighted index has fallen by almost two per cent to three-week lows as traders continue to take profit on sterling’s recent appreciation. The pound’s altitude has been driven in large by a significant shift out of the euro and euro-denominated assets.
US dollar
The US dollar firmed after initial third quarter US growth estimates were disappointingly revised down, which of course weighed on market sentiment therefore encouraging a pick-up in demand for safer investments.
Euro
Attention will centre on the euro area’s economic difficulties with a long list of critical indicators on the region’s services and manufacturing sectors anticipated to amplify fears of a recession. The euro resumed its downtrend against its major counterparts after a gauge of consumer confidence across the 17-member group fell to August 2009 lows.
Japanese yen
The yen has moved to six-week highs against the pound, and is fast approaching similar heights against the euro, as investors focus on economic and monetary policy uncertainties in both the UK and eurozone.
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