The safe haven US dollar slid to fresh 14-month lows against the euro after relatively firm Chinese manufacturing data kept headlines positive, and before US unemployment data that is expected to keep the Federal Reserve firmly locked its long-term plan to stimulate the US economy through dollar-negative asset purchases. Sterling is struggling to resist an advancing single currency but further gains against the US dollar come at timely point for the pound in front of UK manufacturing PMI survey. The index of business activity could give investors an indication of what to expect from next week’s key services PMI, data that could significantly weaken or bolster speculation about a potential triple-dip economic recession in Britain.

Sterling

Cable rose to one-week highs and may need every bit of that extra weight as its heads into a run of three PMI surveys on key areas of the British economy. The pound’s slight pick-up, which includes January 2010 highs against the yen, have been largely driven by updates from the US pointing towards another year of quantitative easing from the Federal Reserve. However, sterling is also undergoing a very similar assessment, suffering badly in January on the belief that a potential triple-dip recession will push the Bank of England into new money-printing action.

US dollar

The US dollar is looking pretty vulnerable ahead of US non-farm payrolls and unemployment figures which may reinforce expectations that the Federal Reserve is a long way off from considering an end to its super-dovish position on monetary policy. A shock drop in fourth quarter US GDP and weak jobless claims data underlined the Federal Reserve concerns, while Chairman Ben Bernanke in his statement earlier stood firmly behind the central bank’s $85 billion-a-month stimulus plan.

Euro

The euro finished January in style after scaling new highs against the US dollar and yen, as the Federal Reserve and Japanese Government reaffirm a commitment towards unlimited monetary easing, whereas the European Central Bank suggested that it was not looking to loosen its policy any further. The single currency advanced by as much as five per cent against the US dollar in January alone, and starts at fresh 14-month highs. The euro could maintain its climb, perhaps at a slower pace though, if investors continue to focus on signs of an economic recovery in Germany, the region’s healing bond markets, and the Federal Reserve dollar-devaluing stimulus plans.

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