The euro has fallen more than one per cent against the US dollar over the past 24 hours, driven lower in part by poor German retail sales and inflation figures.

The US dollar and Japanese yen have continued to attract safe haven flows as market turmoil in emerging markets continues to rattle investors.

The US dollar found further fuel for its rally from the US fourth quarter growth data which justified the Federal Reserve’s shift towards tighter monetary policy and helped make the case for more tapering. The pound is under pressure again despite the stronger-than-expected UK consumer confidence data.

Sterling

Investors continued to react to the Federal Reserve’s stimulus taper as well as ongoing concerns about emerging markets, pushing the US dollar higher and cable down to a nine-day low. Uncertainty surrounding the Federal Reserve’s move towards tighter, or less accommodative policy may continue to drive safe haven flows although the pound should find some support following the solid consumer data. UK consumer confidence in January according to GfK’s monthly index rose to a six-year high.

US dollar

The US dollar rallied to one-week highs against a currency basket after solid US GDP data reaffirmed expectations of continuous Federal Reserve tapering. The Federal Reserve had initiated US dollar buying after it announced a second round of stimulus tapering in as many meetings, reducing its monthly bond purchases by a further $10bn. The US dollar found further fuel for its rally from the US fourth quarter growth data which justified the Federal Reserve’s shift towards tighter monetary policy and helped make the case for more tapering. A slowdown from third quarter growth of 4.1 per cent, the initial estimate of 3.2 per cent expansion between October and December was taken as positive by markets given the fiscal headwinds the US economy faced, such as a government shutdown.

Euro

The euro fell by almost one per cent against the US dollar at one stage and is trading at one-week lows in front of the eurozone unemployment and inflation reports which will likely influence the European Central Bank’s interest rate decision next week. Analysts widely expect unemployment to hold near a record 12.1 per cent in December as several economies, including France, struggle to get more people back in work. Eurozone inflation is forecast to pick-up slightly though, ticking up from an annual rate of 0.8 per cent to 0.9 per cent.

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