The safe haven US dollar collapsed after eurozone leaders finally came good on their promise to end the region’s sovereign debt crisis. Sterling is being left behind on UK growth fears after data on industrial activity fell to record lows. The New Zealand dollar and its Australian counterpart are up sharply after the Reserve Bank of New Zealand left interest rates at 2.5 per cent but talked up the chance of hikes in the future.

Sterling

Sterling is under broad pressure after falling sharply to one-week lows against the euro. Investors are piling back into riskier assets after eurozone leaders announced their radical plan to end the sovereign debt crisis. Sterling is being overlooked given the uncertain outlook for the UK economy and after the Confederation of British Industry reported that its measure of UK factory orders in October fell at their fastest pace in 12 months.

US Dollar

A number of US Federal Reserve officials have recently stated that more quantitative easing cannot be ruled out given the instability of the US economy and high level of unemployment. The greenback is already under significant pressure from a remarkable pick up in risk appetite after Europe announced a wide-ranging debt-fighting plan.

Euro

Germany and France struggled with private banks before dramatically announcing that a deal had been reached. Private investors will now voluntarily accept a 50 per cent “haircut” on their portfolio of Greek debt although it is believed that banks will be offered a “sweetener” in return. The euro powered higher and clocked a seven-week high against the US dollar as investors unwind their short positions on the euro where investors had bet on the single currency declining.

Japanese Yen

The refuge yen is experiencing declines against almost all major currencies after Europe announced its long-awaiting strategy to end the fiscal crisis. However, the damage has already been according to the Bank of Japan after it decided to expand asset purchases by another five trillion yen in order to stimulate growth and apply more yen-weakening pressure. The Bank of Japan decided to hold interest rates at a range of zero to 0.1 per cent as expected.

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

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