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Daily currency report

Overview

The euro surged to two-week highs against the US dollar after the European Central Bank dismissed talk of interest rate cuts, and also reassured markets about its recent efforts to relieve the debt crisis. The pound could not keep up with the euro but did use the single currency as leverage to help cut down the US dollar and also reach two-week peaks; levels not far from September’s one-year highs. There was also relief in Asia and gains for the yen against the US dollar and pound, after the Bank of Japan refrained from inflating its bond purchasing programme which indirectly deflates the yen. However, currencies generally are still struggling to really lift off after ECB chief, Mario Draghi, gave no clear indication about whether Spain will request a bailout or keep investors in limbo for some time yet.

Sterling

The pound rallied against the US dollar and could add to those gains should data on the US labour market weigh on the US dollar. However, with the pound approaching September’s one-year highs, and question marks about the UK economy still lurking, traders may also use the data as reason to take profit on the pound’s advance.

US dollar

The pound rose and is now exchanging hands not far from September’s record peaks ahead of the US unemployment data. Investors appear to be leaning slowly towards the British currency although market reaction to US non-farm payrolls data remains highly unpredictable. On the surface, another weak jobs report should hurt the US dollar by suggesting that the Federal Reserve may have to keep its monthly quantitative easing injections going for longer than expected.

Euro

The European Central Bank said that it had not discussed cutting interest rates at its two-day meeting; sending the euro racing towards a two-week high against the US dollar. The single currency also found strength from comments from president Mario Draghi, who said that the ECB’s bond-intervention programme, launched last month, had already worked in calming financial markets. However, Draghi’s remarks on a possible bailout for Spain were less than secure, and that uncertainty has already seen the euro slip.

Japanese yen

The yen is moving back from Thursday’s two-week lows against the pound after the Bank of Japan decided not to take up more stimulus for the economy, despite pressure from government officials calling for aggressive monetary easing. Central bankers cut Japan’s growth forecasts amid a highly uncertain external environment.

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