The pound remains under pressure, trading at over one-year lows against the euro after more weak UK data highlighted the vulnerability of the British economy. Consequently, traders are scaling back expectations of a rate hike from the Bank of England this summer while in contrast, the European Central Bank may signal that interest rates in the eurozone could be raised again soon. With the ECB likely to raise rates again ahead of fellow central banks in the UK and US, the euro remains in demand despite more questions being raised over sovereign debt in peripheral eurozone nations as well as dreadful retail sales data. Weak US data encouraged a pullback in risk appetite, thus providing the dollar with some respite against higher yielding rivals as global stocks and demand for commodities fell sharply. Demand for safer assets saw the dollar fall to a new record low against the safe haven Swiss franc while the greenback remains near 17-month lows against the in-demand euro.

Sterling

The pound still finds itself at over one year lows against the euro and trading near a record low against the Swiss franc following disappointing construction data. April’s CIPS Construction PMI fell to 53.3, significantly below the previous month’s level of 56.4. The news will further cloud the interest rate outlook for the UK economy with April’s manufacturing data and last week’s Q1 GDP number suggesting that the market could labour through the summer months.

US Dollar

Weak US data encouraged a pullback in risk appetite, thus providing the dollar with some respite against higher yielding rivals as global stocks and demand for commodities fell sharply. ISM’s non-manufacturing index fell in April to 52.8 from 57.3 in March, representing the slowest pace of growth in eight months. Furthermore, ADP’s employment report for the same month showed the smallest gain in employment growth this year which does not bode well for key Non-farm Payrolls data.

Euro

Despite the drop in global sentiment, the euro managed to maintain record levels and is hovering near a 17-month high against the US Dollar. The single currency remains in demand heading into the European Central Bank rate announcement given a strong possibility of President Jean-Claude Trichet signalling that more rate hikes are in the pipeline.

Japanese yen

The yen rose after weak US data prompted a move for safer assets. Subsequently, the yen opens near March 2011 highs against the US dollar and heading back towards intervention territory.

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

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