Daily currency report
Overview
Financial markets are looking shaky, with stocks making a negative start and the euro struggling against selling pressure as investors reconsider their outlook for Europe’s debt crisis. The US dollar and Japanese yen are looking stronger already as they attempt to recover from recent monetary easing actions by the US Federal Reserve and Bank of Japan. End-of-the-month profit-taking may also work in their favour if investors use events this week to lighten up on more risky currencies such as the Australian and New Zealand dollars. The British pound may head into profit-taking against the US dollar this week after hitting record highs on Friday. But at the same time, sterling could also find itself benefiting from any bids for refuge currencies if confidence in Europe’s debt-management skills fades.
Sterling
Investors may look to consolidate their positions on the British pound over the coming days as new concerns about the eurozone encourage safety flows out of the euro and into more predictable assets. However, with month-end approaching, the pound may stumble against the US dollar if traders decide to cash in on the British currency’s recent strong run.
Euro
The euro has been put under immediate selling pressure after a weekend meeting between and reduced confidence in Europe’s ability to make further progress on easing its debt crisis. French President François Hollande and German Chancellor Angela Merkel surprisingly displayed their different views on plans to introduce a wider banking union and the euro has subsequently slid further away from recent four-month highs against the US dollar. Nonetheless, investors were already expecting a stiff test for the single currency ahead of a week which is littered with potential hurdles.
US dollar
The US dollar is likely to follow global sentiment over the coming days and is already pressing the euro and other more risky currencies as concerns about Europe’s debt crisis dominate news headlines. On the domestic front, investors will look ahead this week to data covering the housing market and the health of US consumers. Although the reports will add to discussions about slowing growth in the economy, the data is not expected to have much of a lasting impact on the US dollar. The US dollar has already suffered heavily after the Federal Reserve launched its third quantitative easing project this month, sending the greenback crashing to multi-month lows.