The dollar is making gains off euro weakness on news that Greece will need to restructure its debt, that a far right party in Finland will join a coalition government and could affect the outlook for a Portuguese bailout, and that Moody’s had yet again downgraded Ireland’s sovereign debt rating

Sterling

Softer inflation figures seen at the end of last week could help limit any sterling gains. The softer CPI of four per cent year-on-year suggests that the Governor of the Bank of England is correct to assume the recent price spike is transitory. Nevertheless, markets will remember that one set of figures does not establish a trend.

US dollar

The US is rebounding on euro weakness. Economic data supported the view that an economic recovery was underway, but not so strong as to stoke inflation fears. Industrial output was released as up by 0.8 per cent, while a New York manufacturing survey showed strong gains to 21.7. The release of core CPI survey was extremely benign at 0.1 per cent in March.

Euro

A news story suggested that the IMF saw Greece’s current situation as unsustainable and that a restructuring of their debt was inevitable. The story fanned speculation that had already gotten underway from comments made by Germany’s Finance Minister, who also said that the current outlook for Greek debt is unsustainable. The Finance Minister of Greece came out to deny that there was any such negotiation underway to restructure their debt and said the country will go through with deficit reduction plans and looks forward to re-entering debt markets next year.

Japanese yen

The Japanese yen moves higher as the Nikkei closes lower. A risk off trading environment has started in Asia going into a holiday shortened week in Europe. While the yen has made some gains, its upside will be limited by the threat of G7 intervention. Leaders have committed to limiting yen gains so to defend the economy against a strong currency and the adverse consequences it would have on exports.

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

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