Stuttering debt talks in Greece over the weekend has helped restrain a somewhat bullish mood in financial markets after US non-farm payrolls data completely outstripped expectations on Friday. Accordingly, the nation’s unemployment rate fell to its lowest since February 2009, damping concerns the US Federal Reserve was edging towards another round of asset purchases. The US dollar rallied as a result, recovering lost ground against most rivals including the euro and British pound. Sterling’s earlier rally to 10-week highs versus the dollar lost steam quickly despite data showing growth in Britain’s dominant services sector accelerating at its fastest pace in 10 months. As the risk of economic failure in Greece grows, comments from the Bank of Japan Governor, Masaaki Shirakawa, has done little to ease tensions in currency markets.

Sterling

The pound’s rally to 10-week highs versus the US dollar fizzled after US unemployment data outstripped expectations and investors turned a touch cautious ahead of the Bank of England’s monetary policy meeting this week. There is still an outside chance the Bank of England will proactively look to safeguard the UK economy from a recession by authorising another expansion of its quantitative easing program on Thursday.

US dollar

The US dollar bounced back from multi-week lows against a number of its rivals on Friday in response to US data showing the nation’s unemployment rate dropping by 0.2 per cent in January, it’s lowest since February 2009. The US Federal Reserve’s ultra-dovish monetary policy outlook had stoked fears of more quantitative easing however Friday’s unemployment data has helped suppress that uncertainty. As a result, the dollar looks set to recover lost ground, particularly against the euro and British pound as traders fret over upcoming monetary policy decisions in both the UK and eurozone this week.

Euro

The euro is under pressure after negotiations in Greece between government officials and private investors continue to stumble. Athens must agree a package with its creditors in order to write-off a substantial amount of its debt obligations before it can receive anymore of its bailout money from European authorities. Markets believed a deal to save Greece from economic failure would be penned by the weekend and patience among investors is wearing thin.

Japanese yen

The Japanese yen is down by over 1 per cent versus its US counterpart since reaching three-month peaks last week after Bank of Japan Governor, Masaaki Shirakawa, said last night Japan’s economic health is “severe” because of the yen’s strength. Not only does a strong home currency reduce the competitiveness of exports, but cheaper imports also heighten deflationary concerns.

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

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