The sterling is quickly heading towards two-week lows versus the US dollar after falling by over a per cent as investors scrambled for assets that are least exposed to the eurozone’s economic and sovereign debt troubles. The 17-member economy shrank in the fourth quarter of last year, strengthening analysts’ concerns the single currency area is heading for a deep recession. Meanwhile, the drawn-out Greek bailout saga developed further after Officials there warned private investors that Athens may default on any bonds that are not included in this week’s controversial debt-swap. The euro plunged in response, dropping by over two per cent against the refuge Japanese yen and is fast approaching 3-week lows versus the US dollar. Traders tracking global growth developments also responded negatively to data from the Australian economy that showed fourth quarter growth figures missing forecasts. US stock markets fell at a record pace amid a growing number of headlines that are weighing on market sentiment.
Sterling
The pound sank 1.2 per cent one-and-a-half-week lows as investors sought refuge in the US dollar amid concerns Greece will struggle to successfully completely the bond-swap operation. Failure could inject fresh uncertainty into financial markets, while news reports suggested that a Greek default is still possible and could cost up to €1 trillion.
US dollar
The US dollar is quickly heading towards three-week highs against a currency basket following a sharp pick up in demand for safe haven investments. Global growth concerns have re-emerged this week after China was said to be targeting lower growth, data confirmed the eurozone economy shrank in the fourth quarter, and Australian growth figures slipped. Furthermore, Europe’s desperate fight to save the Greek economy rumbles on, and nerves ahead of this week’s make-or-break debt restructuring deal in Athens saw leading stock markets plunge at a record pace and demand for riskier currencies all but dry up.
Euro
Revisions to earlier GDP estimates confirmed the eurozone economy contracted 0.3 per cent between October and December, sending the euro tumbling on escalating worries of a recession. The single currency looked particularly heavy against the US dollar, falling to mid-February troughs as investors also struggled with the thought of Greece suffering a disorderly default despite being granted its second international bailout last month.
Japanese yen
The Japanese yen soared by 2.3 per cent on the day versus the pound and advanced by a similar margin against the euro as traders put Japanese economic troubles to one side and transferred their attention back to eurozone debt risks.
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