The euro nosedived by nearly 1.5 per cent against the US dollar, reversing sharply from levels close to one-month highs to finish the day exchanging hands at one-week lows. Currencies tied to global growth also sank, with the Australian, New Zealand and Canadian dollars all bearing the brunt of sell-off in foreign exchange markets. Sterling, on the other hand, managed to register noteworthy gains against most rivals except the US dollar, benefiting from robust British retail sales data and its complementary role as a sanctuary from euro zone risks.

Sterling

British retail sales increased by more than expected in May according to official data released, suggesting that consumer spending could help plug the gap in other areas of the economy. Sales jumped 1.4 per cent, above estimates of a 1.2 per cent increase which investors would have been happy to see after the same measure of consumer demand fell at a record 2.3 per cent in April. Sterling reacted positively, climbing by over one per cent against the euro and by a similar margin against both the Swiss franc and Australian dollar.

US dollar

The US dollar soared by almost 1.5 per cent against the euro to reach one-week highs, while rising by over one per cent against a basket of currencies after economic data from across the globe fanned fears about global growth. Investors were already feeling anxious following an earlier report showing a record sequence of monthly contractions in China’s factory sector. Anxiety then seemed to turn into panic after the US Philadelphia Federal Reserve manufacturing survey for June declined for a second straight month while Germany’s output sank to a three-year low.

Euro

Leaders from the eurozone’s four biggest economies are expected to meet and markets are hoping for news that Germany is softening its stance against injecting money directly from Europe’s bailout funds into the area’s banks. Hopes of a response ahead of a crucial EU summit has helped ease stresses in Spain’s debt markets, however, the euro remains in decline after eurozone economic data strengthened calls for another interest rate cut by the European Central Bank.

Japanese yen

The yen opens at one-month lows against the British pound, weighed down by a sharp fall against the US dollar after dismal economic data from Europe and the US hurried demand for the world’s number one currency.