Daily currency report

Investors appear to have dumped sterling into the category labelled “risky investments”, with Cable reeling towards 2011 lows ahead of UK manufacturing data which is expected to push the Bank of England’s hand on more quantitative easing.

Focus for investors, aside from European troubles, will be US non-farm payrolls data. The blockbuster release is likely to bring an already chaotic week’s trading to a close with another bang.

Sterling

Sterling sank to new lows with investors seemingly putting a distance between themselves and the UK currency amid worries that Britain’s economy could suffer a prolonged contraction as Europe’s debt troubles deepen. Cable, having fallen by almost six per cent in May, has taken another tumble to fresh January lows ahead of UK data which is expected to bolster calls for more Bank of England monetary easing.

US dollar

The US dollar flattened technical price barriers that were expected to slow its recent advance, soaring to new highs against the British pound and euro following more evidence of a slowing global economy which has strongly placed safety as the number one priority amongst investors. A number of US economic indicators missed their mark implying that Europe’s escalating fiscal crisis, which has already put traders on red alert, is sapping US business confidence.

Euro

With Spain now quickly running out of options to slow the rise in its borrowing costs and throw a liquidity blanket over its troubled banking sector, widespread selling of the euro is becoming more severe. To further compound the area’s fiscal and banking woes that have taken the single currency to July 2010 lows against the US dollar, data is likely to show euro zone unemployment reaching another new record high.

Japanese yen

The safe haven yen marched to new highs during a trading session after the European Central Bank appeared to suggest that it was not reluctant to be the solution to Europe’s fiscal mess that is threatening rip apart the region’s banking sector, starting with Spain. The yen’s allure was further bolstered after below-forecast Chinese manufacturing data followed yesterday substandard US economic reports which has strengthen fears of a slowing global economy.