Daily currency report

The US dollar remains the currency of choice for the majority of investors, trading close to multi month highs against both the euro and the pound. The greenback has been the currency to benefit the most from the ongoing crisis in European debt markets as well as the geopolitical uncertainty created by the death of North Korean leader, Kim Jong-Il. With the holiday season fast approaching, many traders will be looking to close their books this week and turn their attention to 2012 and the outlook for the global economy. Consequently, trade is likely to focus on the final readings of Q3 GDP for the UK, the US and France, with no changes expected from previous estimates.

Sterling

Sterling opens the week close to the 10-month highs achieved against the euro last week. While markets may be winding down ahead of the holiday season, the week nevertheless promises to be busy in terms of economic data releases.

US Dollar

The dollar has moved higher as a result of the ongoing eurozone debt crisis as well as safe haven flows following the announcement that North Korea’s leader, Kim Jong-Il died.

Euro

Pressure continues to build on the single currency after Fitch’s Ratings agency issued warnings of looming downgrades to Belgium, Spain, Slovenia, Italy and Ireland, and stated a solution to the European credit crisis was “technically and politically beyond reach”. Consequently the single currency opens the week at multi month lows versus the US dollar and sterling. Such is the worsening outlook for the beleaguered eurozone that European Central Bank chief, Mario Draghi, felt moved to issue a separate warning over the huge cost of a potential eurozone break up. While Draghi’s warning was interpreted as a move to assuage investors, he was at pains to emphasise that it should be the regions politicians who rebuild confidence by ensuring fiscal discipline and making the European Financial Stability Facility fully operational. Nevertheless, with no comprehensive solution on the table to the ongoing problem of sovereign debt, the crisis looks set to rumble on for the foreseeable future.

Japanese Yen

News of the death of North Korean leader, Kim Jong-Il, offered the yen a degree of safe haven support, with markets wary of the geopolitical uncertainty created as a result. Immediately following the announcement, Japanese government bond prices also improved as investors sought out relatively safe investments.

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