The euro maintained its more bullish tone, underpinned by hopefulness that eurozone leaders are closing in on a grand plan to solve the continents debt crisis. After the recent Franco-German pledge of announcing a solution before month end, the euro has risen sharply, breaching notable highs against the US dollar, yen and various other rivals. The single currency also flirted with one-month peaks versus the pound after record high UK unemployment figures sent sterling tumbling across the board. In complete opposite, better than expected jobs data from the Australian economy boosted the Australian dollar. Export data from China slipped, which will no doubt heighten global growth fears although reaction to both events appears to be soft. However, nerves may soon begin to set in despite rallying calls of coordination from key eurozone officials which leave the euro and other risky investments exposed to profit taking.
Sterling
The weight of record 17-year high unemployment figures forced sterling to new lows yesterday. Although claimant count numbers for the month of September were no where near as disappointing, the shocking update on labour market conditions does not bode well for the UK economy. While conditions deteriorate, expectations of another recession strengthen and as a result, sterling fell to almost three-week lows against the euro before a technical correction supported a mild recovery.
US dollar
The US dollar fell broadly, underpinned largely by optimism that eurozone leaders are preparing a concrete solution to the area’s government debt and banking troubles. As confidence of a resolution grows, the need for refuge currencies decreases and consequently the dollar is heading towards one-month lows against the somewhat more bullish euro.
Euro
Judging by recent price action, investors may continue to take the euro higher on hopes that the 17- member group will announce a thorough solution to the continents debt crisis before November. Certainly that is what both Germany and France have promised. Since that pledge last Sunday, the euro’s trade weighted index, which measures its performance against a basket of rivals, has risen close to one-month highs. Particularly of interest to markets is the single currency’s rapid rise to a similar peak against the US dollar.
Japanese yen
While key officials from within the euro region rally leaders into backing a coordinated and far-reaching response to the infectious debt crisis, stock market performance and investor attitude from across the globe continues to turn more buoyant. Although risks still remain, traders are unwinding their stockpiles of defensive yen holdings.
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