The pound tumbled to a two-month low against the euro and is in danger of further declines after the release of the Bank of England minutes. Sterling also fell against the refuge US dollar, a currency that is regaining its appeal amongst some traders who fear a slowdown in the Chinese and Japanese economies, the world’s second and third largest respectively, will hamper global growth prospects in 2012. Japanese economic troubles continue to plague the yen which fell through key technical barriers versus the US dollar. The euro surprisingly traded within familiar ranges despite a string of weaker than expected flash PMI measures of eurozone manufacturing and services sector activity in February. It seems investors remain paralysed as they try to come to terms with Greece’s complicated rescue package before pricing-in its ramifications on Europe’s wider debt crisis
Sterling
The pound sank to its lowest level against the euro since December 13th after minutes from the Bank of England’s February monetary policy meeting revealed two of its nine members had voted for a bigger expansion of the central bank’s stimulus program. Policymakers decided to add another £50 billion of gilt purchases earlier this month while some felt as much as £75 billion was needed to shore up the British economy. The notes added further concern for markets, suggesting a number of committee members were concerned a more forceful approach would have sent the wrong signal to investors about the nation’s economic well-being.
US dollar
The US dollar climbed to new highs against its more risky rivals such as the Australian dollar and British pound as global growth worries and concerns over Greece’s financial health continued to support safe haven flows. Also, anxiety over whether or not China’s economy is heading for hard-landing this year is limiting carry trade activity.
Euro
The euro traded within familiar ranges against the US dollar and managed to progress to a two-month high versus the British pound despite a number of worrying economic figures released. Surprisingly, traders failed to react to the data which indicates the 17-member euro area is headed towards recession. Instead, investors remain paralysed by uncertainty over Greece’s bailout package with speculation mounting over whether Athens can come good on its austerity pledge or whether international lenders will need to consider the possibility of a coordinated default.
Japanese yen
The Japanese yen tumbled straight through strong technical barriers versus the US dollar to levels last seen in July 2011 in what appears to be a major correction in the currency pair.
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