The US dollar came under heavy selling pressure on the back of weak economic data. Furthermore, the ratings agency, Moody’s, said that it would put its rating of US debt under review for a downgrade if politicians do not show signs of coming together on raising the debt ceiling by mid-July. News that a second Greek bailout package has been agreed upon by one senior official helped to support the euro. Sterling was guarded against further losses against the euro after a CIPS construction survey surprised and beat market forecasts.
Sterling
Sterling found some much needed support with the release of CIPS construction PMI figures. The survey beat market forecasts and was lifted by the new orders component. Furthermore, the employment component rose for the first time since June 2010. The data was released just after comments from Bank of England’s Fisher, who said that he would be open to further quantitative easing measures should the UK economy stall.
US dollar
The US dollar succumbed to more selling pressure as weak economic data in the US kept alive fears that thenon-farm payrolls release will fail to live up to expectations. Factory orders fell below forecast at -1.2 per cent month-on-month, while weekly jobless claims remained well above the 400,000 mark, which is synonymous with a weak jobs market. A very soft reading on non-farm payrolls could initially support the dollar before heading lower. The gains would come on the back of safe haven flows as investors fear that the global economy is headed for a more severe downturn verses just a soft spot of data. Any dollar buying is likely to be short-lived.
Euro
The euro faces the release of the PMI service sector survey. Currency markets are focusing on the European debt crisis and whether or not Greece has really agreed to a bailout programme or not and if so what the details are. Any downside for the euro will likely be protected in front of next week’s ECB MPC meeting where policy makers are expected to warn of “strong vigilance” for price stability.
Japanese yen
The yen is up against sterling, Swiss franc and dollar, but down against a rising euro. Like the yen, Asian equity markets are mixed. The only internal factor that had disrupted trade in the yen was the no-confidence vote for the Prime Minister whereby the he survived the vote only by agreeing to hand over power once crisis management has been completed.
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