A shocking drop-off in support for German Chancellor Angela Merkel’s CDU Party is likely the key factor keeping eurozone leaders at odds with each other over new anti-crisis measures to protect the single currency area. Member states remain reluctant to offer further aid to the Greek economy, seemingly heading towards default unless it can persuade lenders that it will meet fiscal requirements.

Sentiment towards sterling remains mixed at best. The Bank of England’s MPC September meeting minutes could show other members of the committee joining Adam Posen in calling for additional stimulus measures on growth concerns. Fellow members Martin Weale and Spencer Dale have already retracted their earlier votes for rate hikes and should the group look to be turning noticeably more dovish in tone, the pound may face renewed selling pressure.

US dollar

The US dollar continues to emerge as the most favourable safe haven destination for anxious investors as Swiss and Japanese authorities remain hell-bent on limiting the strength of their respective currency units. President Barack Obama aggressively put forward his controversial proposal to tax wealthier Americans as part of his $3 trillion plan to cut the country’s deficit. According to several analysts this type of bold and radical action is exactly what the needs in order to appease rating agencies which seem intent on punishing fiscal incompetence.

Euro

The euro almost breached a new 10-year low against the yen and there is plenty of scope for more downside yet. The resolve of the single monetary union continues to be tested to the very limit and if market indicators are anything to go by, the single currency area is failing miserably.

Japanese yen

Officials sounded caution on the yen’s unwelcome strength, making clear that markets should expect more action against what they call “one-sided” gains.

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