Fresh austerity measures outlined in Ireland and Italy failed to prevent a deterioration of sentiment in the eurozone. The euro is trading lower and US dollar has moved higher against most major currencies. The yen and Swiss franc, traditional safe havens, have also posted gains.

Sterling

Sterling rallied, buoyed by stronger than expected services sector data for November. The headline figure was released above consensus forecast at 52.1 in November. Unfortunately there was some bad news contained within the survey, which showed employers shedding jobs at their fastest pace in a year. As a result, the outlook for growth remains weak.

US dollar

The economic data in the US was not as uplifting as had been hoped. Factory orders were down by 0.4 per cent and November’s ISM non-manufacturing index was weaker than expected. Indeed, the release suggested that the pace of growth was actually slowing in the services sector.

Euro

Trading in the euro was dominated by Standard and Poor’s warning that all 17 euro countries could see their credit ratings downgraded unless policymakers move swiftly and decisively to resolve the ongoing crisis. This announcement overshadowed moves by Angela Merkel and Nicolas Sarkozy to impose stricter sanctions on countries that do not fulfil budgetary requirements. Markets also ignored new austerity measures proposed by Ireland and Italy.

Japanese yen

The Japanese yen is trading higher against most major currencies. The yen made gains as safe haven demand picked up in the Asian session. Equity markets are all trading in negative territory and the RBA’s decision to lower interest rates contributed to the gloomier growth outlook.

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