The euro fell sharply and closer to another all-time low against the Swiss franc after rating agency Standard & Poor’s announced that the recent Greek rescue package amounted to “selective default”. Fellow agency Fitch also warned Italy that tougher austerity measures are needed as markets wait for the next eurozone domino to fall. New Zealand’s central bank held interest rates at 2.5 per cent, but its apparent signal that rate hikes are imminent continued to support the “kiwi’s” push to new record highs. In contrast, sterling came back under pressure after weak UK manufacturing data highlighted the economy’s fragile condition. The Swiss franc and Japanese yen continued to firm towards new record highs as investors, spooked by tumbling stock markets, scramble for safe haven assets. The US dollar still remains the key driver in currency markets and did in fact manage notable gains which came as a surprise.
Sterling
Sterling maintained recent levels despite coming under renewed pressure following more weak UK manu-facturing data. Unemployment prospects within industry are worrying, adding further pressure on the Bank of England to continue supporting loose monetary policy.
US dollar
Various factors from both home and abroad allowed the US dollar to regain some lost ground on its key rivals, although the currency’s momentum still remains very negative right now. A reminder of eurozone risks and frail UK data provided the dollar with default gains while weak US data also prompted risk-wary investors to scale back on uncertain positions.
Euro
The euro fell sharply on Wednesday after rating agency Standard & Poor’s announced that Greece’s rescue deal amounted to “selective default” while cutting the country’s rating grade even further. The emergency Greek deal has only papered over the cracks for now, according to many analysts, and discontent among eurozone leaders may also be a sign of things to come. Despite relenting on a previous stance that “deficit sinners” should not be treated with leniency, Germany may not be willing to hand over more German taxpayers’ money when another eurozone nation comes calling.
Japanese yen
Japanese retail sales rebounded strongly in June, representing the first increase since the earthquake disasters in March. Positive economic data, coupled with investors seeking shelter from global headwinds, allowed the yen to firm even further. The yen is now at its strongest level against the US dollar since the post-World War II high.
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