Sterling rose sharply against the euro amid signs European leaders are reconsidering plans to save the Greek economy while the Bank of England’s inflation report tempered quantitative easing concerns. The UK central bank unexpectedly upped its inflation forecast which gave the pound an immediate boost, supported further by local unemployment data that suggested the UK labour market could be stabilising. Nonetheless, eurozone headlines dominated trading activity, sending the single currency tumbling across the board alongside global stock markets. There are widespread reports eurozone officials have grown tired of delays in debt negotiations with Greece and are considering withdrawing Athens’ second bailout and replacing it with a short-term cash injection. The prospect of a Greek default is growing by the day and promises of a deal progressing fell on deaf ears. Markets are growing extremely wary of Europe’s debt crisis and, as a result, the refuge US dollar rose broadly as investors put US monetary concerns to one side. Risk aversion hit high-interest assets hard although an encouraging employment report from the Australian economy helped limit the Australian dollar’s slide.
Sterling
Sterling rose by over one per cent on the day to one-week highs against the euro after the Bank of England’s inflation report tempered concerns of more quantitative easing while it emerged that European authorities are considering withdrawing a second bailout package for Greece.
US dollar
Escalating concerns about the Greek economy lifted the refuge US dollar to three-week highs against a group of currencies. Signs European leaders are slowly losing grip on plans to save Athens from default panicked traders into defensive assets as stock markets also tumbled.
Euro
The euro sank to three-week lows against the US dollar amid reports European authorities are preparing to withhold Greece’s second bailout and instead provide Athens with a short-term cash-injection enough to buy the debt-stricken nation a little more time. Markets therefore reacted, sending the single currency down across the board after Greece’s finance minister accused Germany of trying to force the Greeks out of the eurozone by publicly questioning the country’s credentials.
Japanese yen
The Japanese yen fell to its lowest level against its US counterpart since Japanese authorities intervened to weaken the yen last October. Investors continue to sell the Japanese currency, possibly feeling they had already overstretched its value, after the Bank of Japan stepped up its growth-supportive measures.
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