Daily currency report
Overview
The euro moved to one-week highs versus the pound after Japan announced a new plan to buy eurozone government debt, weaken the yen, and bolster European demand for Japan’s exports. Demand for sterling was also dampened after the British Retail Consortium published weak UK retail sales figures which reinforced concerns about the health of the British economy. The US currency still remains close to recent highs against the pound and euro and could easily revisit those levels should eurozone economic data remind investors of Europe’s poor economic outlook. Germany has already released substandard export numbers while analysts are expecting to see the eurozone’s latest unemployment data hit another new record high.
Sterling
Japanese support for eurozone debt has helped sterling move higher against its safer rivals, the US dollar and Japanese yen, but sterling opens trade at one-week lows against the euro and remains vulnerable after fragile UK retail sales data. The British Retail Consortium last night reported just 0.3 per cent growth in consumer spending in December, down from the prior month’s 0.4 per cent print and below the 0.6 per cent result some in the market were anticipating.
US dollar
Investors were already trading the US currency more cautiously following US unemployment data which suggested the Federal Reserve will maintain an ultra-accommodative monetary policy position for much of 2013. Still, the US currency remains close to recent highs against the pound and euro and could easily revisit those levels should eurozone economic data remind investors of Europe’s poor economic outlook.
Euro
The euro reversed earlier losses to close the session much stronger as Japanese Finance Minister, Taro Aso, announced that Japan will start to buy eurozone Government debt in a bid to weaken the yen. The move by Japan is also expected to help prop up the single currency in a bid to help back exports from Japan into the single currency area. The euro had found buying interest ahead of the Japanese announcement, after a measure of eurozone investor sentiment in January was released above expectations. However, the euro could pare gains after Germany reported a much larger drop in exports than markets had forecast, while investors expect Berlin to publish weak industrial orders data. The euro area will also uncover its latest unemployment figures, and predictions so far point towards yet another new record high.