The US dollar fell again hitting two-week lows overall after disappointing US housing data raised suspicions the economy is still at risk of another downturn. The news has added to the global growth debate after recent figures from China also missed forecasts and, as a result, growth-linked and emerging market currencies remain under pressure. Sterling was relatively unchanged as investors paused to reflect on the week’s developments that included Bank of England minutes and the budget update. The euro is another currency attracting attention ahead of a crucial few days that will include bond sales in both Italy and Spain and a eurozone summit that should address the region’s emergency funds.
Sterling
The pound is relatively unchanged versus its most traded rivals and remains close to one-week lows against the euro. Last week’s Bank of England minutes and the Chancellor’s budget speech kept demand for sterling muted but, with those uncertainties now out of the way, there is a small chance traders could revive their interest in the British currency.
US dollar
The US dollar fell to two-week lows against a basket of currencies as investors continued to book profit on the greenback’s rise. Substandard US housing data was again the catalyst behind the sell-off after February’s new home sales measure tanked 1.6 per cent month-on-month reflecting weak consumer demand. The reaction in currency markets was not just technical since the Federal Reserve still remains watchful of housing sector developments.
Euro
The euro seems to be attracting attention again as investors’ eye this week’s bond sales in Italy and Spain, another eurozone summit, and key data that will help answer questions about the health of the German economy. The shared currency traded close to three-week highs against its US counterpart although a vast majority of its resilience was helped by focus on the US and UK economies. However, the euro may not be afforded the same protection over the coming days as markets seek clarity over Europe’s unfinished safety net for debt-burdened countries and policies needed to promote growth.
Japanese yen
After dropping by over 10 per cent against the US dollar since early February, the yen rose to over one-week peaks as focus in financial markets shifted back onto global growth and eurozone debt concerns. Investors’ unwound risky carry trades in favour of the safer yen whilst year-end repatriation was also a factor.
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