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Daily currency report

Overview

The euro is pressing ahead from two-week highs against the US dollar after German Chancellor Angela Merkel said she remained optimistic Europe will agree on Greece’s latest loan deal. However, the euro’s climb could be interrupted by key eurozone PMI data followed by EU budget talks. Sterling rose to two-week highs against the US dollar after Bank of England minutes were not as dovish as some in the market had expected. The pound will now have to tackle data from the CBI and growing pressure on the UK Government’s fiscal plans after public borrowing numbers were bigger than expected.

Sterling

Cable is closing in on two-week highs while the pound also reached seven-month peaks against the yen, after Bank of England minutes indicated the central bank will not consider new stimulus measures for the UK economy until next year. The notes revealed an 8-1 vote in favour of keeping the size of the BoE’s asset-buying plan at £375 billion at its meeting earlier this month. Comments from the report suggested the Monetary Policy Committee needs more time to examine the impact of earlier cash injections and the central bank said that it is not considering making any changes to interest rates which were also held at 0.5 per cent.

US dollar

The US dollar saw its safety appeal weaken after a measure of US manufacturing for November recorded the fastest growth in the sector in five months. US weekly jobless claims also fell, giving investors more good news about the US economy as a platform to chase higher yields at the US dollar’s expense; pushing euro/US dollar to two-week highs. That move was also strengthened by encouraging Chinese data, and comments from Germany hinting that a deal to solve Greece’s latest financial crisis could come at another eurozone meeting.

Euro

German Chancellor Angela Merkel said that she remains hopeful a deal for Greece will be struck, helping the euro recover losses which had come after eurozone officials had failed to agree on a new loan agreement for Athens. The single currency then found further support after solid economic data from the US and China refreshed the markets interest in risky currencies, allowing the euro to start at two-week highs against the US dollar. EU budget talks will be closely monitored but key PMI surveys are likely to have a heavier effect on the euro.

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