The British pound slipped to five-month lows against the euro as the build-up continues ahead of vital UK GDP data, while the Japanese yen also experienced another forgetful session. The Japanese currency tumbled to three-month lows against the US dollar and may struggle further on the view that the Bank of Japan is highly likely to increase monetary easing at its next meeting.
The euro is looking somewhat vulnerable following Moody’s latest Spanish downgrade. The US dollar is therefore providing the typical safety net for traders and the greenback has made a very strong start.A lack of top tier data on European diary could keep risk averse momentum going before Bank of Cananda announcement and a potentially market-moving speech by Bank of England Governor, Mervyn King. Otherwise eurozone PMI surveys and the Federal Reserve’s monetary policy statement should really get the week going.
Sterling
Sterling is slowly edging towards one-month highs against the yen on the growing belief that disappointing Japanese export data, a key measure of the export-reliant economy’s health, was a big step in the direction of even looser Bank of Japan monetary policy. Such guesswork has also seen the yen shed about three per cent of its value against the US dollar over the past three weeks, a huge shift for what is usually a slow moving pair. Sterling fell to a five-month low against the euro as uncertainty builds ahead of a third quarter growth data for the British economy
US Dollar
The US dollar’s start is hinting at a “risk-off” approach to currency markets which should favour the US currency and the country’s bonds. The move may well be a reaction to a decision by Moody’s to downgrade a list of Spanish regions due to worries about their access to credit.
Euro
The euro took off briefly, reaching five-month highs against the under-fire British pound, but remained confined to a familiar price band against the US dollar with investors still undecided about how an expected bailout for Spain may unfold. However, traffic in and out of the single currency is likely to pick up ahead of eurozone PMI surveys and Germany’s IFO business sentiment index.