Daily currency report

Some indifferent corporate earnings reports and a disappointing EU summit helped the safe haven US dollar close higher. However, the US currency could head back towards its October lows should the Federal Reserve print an optimistic outlook for the world’s number one economy after its policy meeting. The Japanese yen has failed to match its safe haven US rival’s latest jump; tumbling after dreadful Japanese export data strengthened the Bank of Japan’s case for more monetary easing. Sterling looks steady but still remains near recent lows against its key rivals and UK GDP data could prove to be the next “game-changing” release for the pound. With British growth data in mind, the euro could turn four-month high into a five-month peak versus sterling, although investors could also be reminded of Europe’s economic woes.

Sterling

The British pound gets up and running above a four-month low against the euro after European leaders failed to present a convincing fiscal plan for the single currency area. However, further progress from here against the euro and other major currencies should pivot initial third quarter UK growth data. Britain probably came out of recession in the July to September period but traders may want to see evidence of sustainability without new cash injections from the Bank of England.

US dollar

The US dollar gained sharply following the EU’s somewhat disappointing summit and may gather further support ahead of a busy economic calendar. A number of central banks including the Federal Reserve will meet to decide on monetary policy and their growth projections ought to have a big influence on the outlook for the world economy.

Euro

The latest eurozone summit failed to produce any significant progress on tackling the debt crisis whilst there was no key information released about Spain to help investors continue guesswork around a possible bailout for Madrid. As a result, the euro opens down against the US dollar by about one per cent compared to the one-month high that it had struck on October 17.

Japanese yen

The Japanese yen is enduring a tough time having fallen to three-month lows against the US dollar. The swift drop came in response to Japanese trade and business sentiment data pointing to a struggling economy and a central bank that may have to expand its monetary support programme at its next policy meeting on October 30.