The case for an end to the Federal Reserve’s stimulus programme grew after data on US retail sales extended a run of forecast-beating US economic indicators in recent weeks, keeping the US dollar elevated near last week’s record highs. However, the US currency does open a little weaker on the back of a technical correction, or profit-taking ahead of the German investor sentiment report. The euro managed to hold above one-month lows against the US dollar and may strengthen with markets expecting Germany’s ZEW index to raise optimism about Europe’s growth-engine economy before it reports GDP data. At the same time though, demand for the single currency remains depressed amid concerns fragile eurozone GDP data will push the European Central Bank towards looser monetary policy. The pound joined a long list of currencies trying to cope with a broadly stronger US dollar, hitting fresh two-week lows on a combination of optimism about the US economy and worries ahead of UK unemployment data and the Bank of England’s Quarterly Inflation Report. Sterling also lost ground against the euro but is being supported by UK house price data from RICS.

Sterling

Sterling dropped to fresh two-week lows against the US dollar after improved US economic data supported the case for a reduction in Federal Reserve stimulus while markets remain cautious ahead of UK data and inflation report from the Bank of England. The pound has now surrendered about 2 per cent in value against its US counterpart since reaching 2½-month highs on 1st May and is struggling to keep pace as investors’ eye an end to, or fewer asset purchases by the Fed.

US dollar

Investors pumped more money into the US dollar, elevating the US currency close to August 2012 highs on a trade-weighted basis after better-than-expected US economic data inflated expectations of the Federal Reserve turning hawkish on monetary policy.

Euro

The euro wrestled with recent one-month lows against the US dollar but jumped against a weaker sterling as investors anticipate a pick-up in German investor sentiment data before the crucial GDP figure. Markets have pencilled in a rise from 36.3 to 38.3 in ZEW’s monthly sentiment report, considered a leading indicator, providing hope that with recent political issues in Italy and Cyprus now out of the way, Europe’s influential economies will start to grow again.

Japanese yen

The yen rebounded from last week’s fall to new record four-year lows versus its US rival, benefitting from a technical correction.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.