The US dollar continues to face selling pressure despite President Obama’s speech outlining deficit reduction. The dollar is likely to remain under selling pressure and indeed a new record low was reached against the safe haven Swiss franc. UK economic data released provided some support for the pound while in the eurozone, industrial output figures were below expectations, but wholesale price data out of Germany continued to support the view that the European Central Bank will continue raising interest rates. As a result, the euro continues to see gains.

Sterling

Economic data released showed a small pick up in the claimant count, but unemployment data saw the rate drop to 7.8 per cent from eight per cent. Additionally, full-time employment rose by 143,000, marking the largest rise since May 2007. Sterling continued to come under pressure against a rising euro, while trading relatively flat against the US dollar.

US dollar

In a speech, President Obama announced his deficit cutting program. He plans to reduce the deficit by $4tr over the next 12 years. The President said that he would do this by taxing the wealthy and with spending cuts. The amount was more than investors expected and helped lift the US dollar. While uplifting, the President’s outline for cutting the deficit, also lacked detail. Republicans immediately criticised the plan by saying that tax hikes would hurt the economy.

Euro

The euro continues to find support on the back of the ECB’s interest rate outlook. While eurozone industrial output figures failed to live up to expectations, the German wholesale price data was inflationary and supports the view that the central bank will continue to raise rates.

Japanese yen

The Japanese yen is trading slightly higher despite economic data that showed business sentiment plunging to record low levels. A Reuters Tankan survey for April showed its diffusion index for large manufacturers coming in at -13 from a prior month’s 15. The release is indicative of the damage that the March 11th earthquake has had on businesses.

Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/

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