Focus in currency markets is still placed at the doorstep of the European debt crisis, which will likely be the driver for trade in the days to come. EU and IMF officials continue to evaluate the progress Greece has made towards achieving its goals of deficit and debt reduction. With this as a backdrop any reaction to flash estimates of first quarter GDP figures is likely to be temporary. In the UK, sterling trade suffered a set back on weaker than expected industrial and manufacturing output figures. The weaker data limits the likelihood of any upside revision to first quarter GDP. In the US, economic data was released more or less in line with forecast, with the exception of improved weekly jobless claims that supported risk appetite.

Sterling

Sterling gains were cut short after the release of economic data that suggested growth was slowing. Industrial and manufacturing output figures for March quelled any hope that Q1 GDP data will be revised upwards. Ongoing maintenance work in the energy sector continues to weigh on the industrial output figures. Stripping out the energy sector, manufacturing output data showed that the pace of growth had slowed.

US dollar

Trade in the US dollar was hardly interrupted by economic data. Retail sales and PPI were released more or less in line with expectations, while weekly jobless claim figures saw a strong pull back from 478,000 to 343,000. The data did eventually help risk appetite which turned around negatively trading equity markets and helped to erase intraday dollar gains.

Euro

The euro could see some initial reaction to the flash GDP data. Leaked German GDP figures, if correct, could help to bolster euro zone growth data. Euro gains will anyway be capped by the ongoing uncertainties of the looming debt crisis. Finance ministers and EU officials will meet early next week to discuss the debt problems in peripheral countries. There was a stark warning issued from the IMF who said that the crisis could still feasibly spread to core economies.

Japanese yen

The Japanese yen is reacting calmly to news that one of the Fukushima reactors has a hole in its main vessel. The discovery suggests that stabilising the plant has becoming increasingly unlikely. The options to encapsulate the entire area with a concrete wall have become more likely, however, even if this will take years to accomplish.

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

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