A sudden jump in Germany’s IFO business sentiment index for November also helped the euro press higher to reach one-month highs against the pound, with sterling struggling to cope with growing worries about Britain’s fourth quarter GDP prospects. However, weaker demand for the safe haven US dollar, which has fallen to two-week lows on a trade-weighted basis, did allow for a rise in Cable.
The US will release its third quarter GDP numbers that will no doubt help strengthen discussions about the health of the world’s biggest economy, and what that means for global growth. The data will probably revive the US fiscal cliff argument too, which could disrupt currency flows over the coming days.Nevertheless, Greek debt negotiations will likely dominate the early part of the week. Should eurozone leaders come up short again, traders who have expanded euro and other high-interest currency accounts in recent days could panic.
Sterling
Recent communication from the Bank of England has strengthened worries the UK economy may stumble again in the fourth quarter. Therefore, investors will pay close attention to revised third quarter GDP data for any evidence which could support concerns the BoE will continue to pursue monetary easing strategies, and that the UK government is losing control of its fiscal agenda. However, much of the markets focus will be on Greek debt negotiations. Should Athens manage to regain access to its bailout fund, sterling could face considerable pressure from the euro and other more risky currencies.
US dollar
Although Thanksgiving holiday kept US financial markets quiet, it appeared to increase attention on the eurozone and magnify hopes Greece will secure a new loan package following a third round of talks between eurozone leaders. This encouraged investors to continue emptying their safe havens pockets, sending the US dollar to its lowest in two weeks on a trade-weighted basis, and to three-week lows versus the euro.
Euro
Greece’s international creditors will come together for the third time this month, and are widely expected to reopen liquidity support lines to Athens. Optimism another aid bundle for Athens will remove fears of a Greek default is giving investors a huge incentive to buy into the euro, stocks and high-interest currencies. Consequently, the euro is staring up at one-month highs against the US dollar, further supported by surprisingly good German IFO business sentiment index.