The euro rose to fresh one-month highs against both the US dollar and British pound and may advance further as investors cut ties with safe haven-related currencies. Improved global sentiment which has grown steadily since lively US jobs data is giving traders the license to chase higher yields. This has led to sharp gains for the Australian dollar after the Reserve Bank of Australia kept its benchmark interest rate at an attractive 3.5 per cent. Sterling is expected to take another hit from UK manufacturing data while investors generally are likely to stay in line for more daring investments at the expense of the safe haven US dollar and yen.

Sterling

Worries about the health of the British economy are spreading quickly, forcing the pound to fight another flourish of negative bets in currency markets. Investors are growing more concerned about how deep the Bank of England will have to dig into its monetary pockets to revive the economy while the government fiscal plans, a key source of the pound’s safe haven attraction, now look to be in jeopardy. UK house price data from Nationwide showed a bigger-than-expected fall in July while retail sales data from the British Retail Consortium provided very little confidence about the London Olympics boosting consumer demand.

US dollar

The US dollar’s trade weighted index, a measure of its performance against its key trading rivals, has dropped to one-month lows and the currency’s move lower may carry on after Germany backed the European Central Bank’s plans to step into government debt markets. Details about exactly how the ECB plans to support debt-strapped nations such as Spain still remain unclear.

Euro

The single currency maintained its bustling start to the month, drawing steady support from investors hoping that the European Central Bank’s promise to do whatever it takes to preserve the euro will prove actionable if Europe’s periphery comes under new pressures in sovereign bond markets. Despite a more optimistic fiscal landscape, persistent economic risks should continue to act as hurdles for the euro.

Australian dollar

The Australian dollar is approaching a five-month high against the British pound and US dollar after the Reserve Bank of Australia kept interest rates unchanged at 3.5 per cent.

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