Sterling produced more noteworthy gains, tracking equity markets higher while investors appear to be taking advantage of a somewhat oversold UK pound. The advance, particularly against the US dollar, came despite more dismal UK consumer spending figures. The euro progressed further whilst investors were also encouraged back into growth and commodity linked currencies such as the Australian and Canadian dollar’s after US economic data was not as disappointing as some had expected. However, the momentum may come to an abrupt halt after key ministers from both Spain and Germany dismissed ideas of leveraging the European Financial Stability Facility fund in order to help restore confidence in euro area government debt.

Sterling

The pound tracked equity markets higher and although the move may just be short lived, sterling has now advanced by over 1.5 per cent against the US dollar since Monday’s open. End of month profit taking may also have been a factor behind the pounds move higher with technical indicators suggesting that current levels may be a good time to take advantage of a somewhat oversold UK currency.

US dollar

The US dollar continued to fall out of favour as investors piled back into assets offering a better return, although more evidence of conflict between eurozone leaders is likely to test that momentum.

Euro

The euro rallied on continued speculation that the 17-nation group are considering leveraging the current €440 billion European Financial Stability Facility to a far more substantial figure in the region of €2 trillion. Any such announcement would immediately impact financial markets and the likely result would be a more persistent rally in risky assets. However, the bigger picture still remains rather gloomy and the euro is still within touching distance of recent eight-month lows against the US dollar.

Japanese yen

Despite rallying stock markets which tend to weaken the yen’s safe haven appeal, the Japanese currency continued to see support from repatriation flows. Big businesses appear eager to bring home overseas earnings ahead of Japan’s fiscal half-year which ends September 30. Those flows are likely to move forward amid concerns there are no immediate plans to tackle contagion spreading across Europe.

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

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