The US dollar tumbled towards eight-month lows against the British pound after weaker-than-expected US first quarter growth data fanned concerns the Federal Reserve may soon be forced to take on more monetary easing. The euro also surrendered more ground against the widely popular currency, now hovering near two-year troughs, following dreadful Spanish unemployment data that put an even bigger question mark over ’s fiscal outlook. The safe haven yen was another currency outperforming both the US dollar and euro despite the Bank of Japan’s latest currency-dilution tactics while the Swiss franc also strengthened.

Sterling

The pound breezed through apparently solid technical price barriers against the US dollar to land within touching distance of eight-month highs after US first quarter growth data slipped. With traders seemingly bracing themselves for another round of Federal Reserve monetary easing while the Bank of England recently turned noticeably less dovish, sterling could easily find its popularity strengthen.

US dollar

Doubts about growth and the need for even more Federal Reserve monetary stimulus intensified after official data showing US GDP in the first quarter lagged behind markets estimates. Investors had forecast an annual rate of 2.5 per cent growth in Q1, down from the previous three months’ three per cent expansion. Instead, the economy grew at an even slower pace of just 2.2 per cent, leading many economists to predict the Federal Reserve will soon offer more cash to ensure the recovery does not falter.

Euro

The euro came close to two-year lows versus the British pound following data showing unemployment in soaring from 22.9 per cent to 24.4 per cent in the first three months of this year. Investors will look to a European Central Bank meeting for more communication on monetary policy although markets are not expecting any changes so soon after the ECB’s special longer term liquidity operations.

Japanese yen

The yen has jumped to multi-week highs against both the US dollar and euro as Bank of Japan monetary policy concerns give way to US growth and eurozone government debt worries. Furthermore, Spanish unemployment figures do not augur well for Madrid ahead of the debt auction which is forcing investors to keep a close hand on the safe haven yen.

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