Daily currency report
Spanish concerns are still looming over investors with worries about a potential full-scale bailout for keeping currency traders focused on safe haven positions. Subsequently, the euro remains under widespread pressure and may fall further if eurozone unemployment data points towards another interest rate cut from the European Central Bank. The US dollar and yen look set to outperform their more risky rivals and may add to recent gains after poor economic data from and turned up the volume on discussions about weakening global growth. Therefore, safety plays may bolster the US dollar but the yen is likely to face some pressure before the Bank of Japan’s monetary policy announcement this week. The Reserve Bank of Australia could deliver an unexpected interest rate cut when it announces its monetary policy decision which could also set the tone for other growth-linked currencies. The Bank of England will also make a decision on monetary policy on Thursday, but with no change widely expected, market participants should pay closer attention to upcoming British PMI surveys to help reinforce their longer term outlook on monetary policy.
Sterling is making a cautious start and has slipped against both the US dollar and yen before a report that is forecast to show Britain’s manufacturing sector shrank again in September.
The US dollar starts trading on the back of another solid week, in which eurozone debt and global growth concerns replaced worries about US monetary policy, taking the greenback to two-week highs overall supported by safe haven flows. It may turn out to be a similar theme this week too, with several central banks due to announce policy decisions that may keep traders on the safer side of the market.
The euro has fallen to fresh two-week lows against the US dollar as Spanish concerns continue to dampen hopes of further crisis-fighting progress in the eurozone. Numbers from Madrid last week covering its latest budget and the money it will ask for to help backstop its broken banking sector were somewhat encouraging; however, investors are still nervous about a full-scale bailout for Spain while ongoing worries about Greece are also keeping up pressure on the euro.