The euro-led currencies at the top end of the yield curve higher after the European Central Bank put up its most comprehensive debt-fighting plan to date; announcing that it will buy unlimited amounts of government bonds to help solve the debt crisis. President Mario Draghi delivered a strong statement following the European Central Bank’s monetary policy meeting, insisting that the central bank’s new Outright Monetary Transactions facility, will be the ultimate backstop for debt-loaded countries like Spain. Defensive currencies are now under broad pressure, with the US dollar and Japanese yen naturally feeling the heat as investors pile into more risky currencies. The US dollar tumbled to two-month lows against the euro and also fell against growth-linked currencies after improved data dampened worries about the global economy. The British pound is also looking strong against its safer rivals and could make it to four-month highs against its counterpart after the Bank of England left its monetary policy unchanged. A surprise rate cut in has also moved the pound up a place in the safe haven currencies table.
The pound is within striking distance of reaching four-month highs against the US dollar, with US unemployment data due for release. Traders are waiting to see if the figures will push the Federal Reserve into one more round of growth-boosting bond purchases at its meeting next week.
US dollar
Recent comments from Federal Reserve Chairman, Ben Bernanke, suggested that upcoming unemployment data will answer questions about whether the Fed needs to deploy another major bond-buying programme, known as quantitative easing 3. The US dollar sank across the board after the European Central Bank stepped forward with its new crisis-ending intervention facility, denting the currency’s safety appeal as traders piled into risky assets. However, question marks still remain about Europe’s latest idea, meaning that strong data could see traders remove bets of QE3 and allow the dollar to rebound.
Euro
The euro broke past two-month peaks against the safer US dollar and Japanese yen and gave risk taking in financial markets a major lift after the European Central Bank said that it will buy unlimited amounts of bonds to help protect debt-strapped euro zone governments. President Mario Draghi finally detailed the ECB’s most comprehensive fire-fighting plan to date, insisting that its new Outright Monetary Transactions scheme, should be seen as the ultimate backstop for ’s fiscal woes.