Any hopes of EU leaders persuading Greece to re-think its astonishing decision to hold a referendum on its bailout package were dashed, following showdown talks between German chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou. Athens is now expected to vote on its euro membership with Mr Sarkozy and Ms Merkel warning that Greece will not receive another penny until it decides whether it wants to remain part of the euro project or not. The warning immediately sent shivers through financial markets and the euro is now likely to suffer from more speculative bets. Naturally, investors stepped up re-building their safe harbour positions with the yen back in demand despite Tokyo’s intervention action earlier this week. The US dollar also firmed after the US Federal Open Market Committee announced no changes to monetary policy. Sterling marched higher against its riskier rivals on increased risk aversion, with the pound’s rise against the kiwi dollar was a little more dramatic after New Zealand disappointingly reported an increase in unemployment.

Sterling

Sterling dipped against the US dollar and yen as investors re-erect their defensive positions on fears of Greece voting itself out of the eurozone which could spark chaos across financial markets. The pound did manage to firm against its more exposed rivals though after UK construction activity picked up at its quickest pace in five months.

US dollar

The US Federal Open Market Committee announced no changes to monetary policy. The dollar initially fell after the Federal Reserve sounded a little more upbeat over current economic conditions which encouraged investors out of risk averse positions.

Euro

The euro has quickly come back under intense scrutiny and may again suffer from speculative bets after Greece’s prime minster, George Papandreou, rebuffed calls from EU leaders to cancel his campaign to hold a referendum on Athens’ latest bailout. A Greek exit from the eurozone could result in a disorderly default and probably lead to the collapse of Italy or even Spain should government borrowing costs surge as a result.

Japanese yen

Despite intervention from Japanese authorities earlier in the week, the yen began to edge back towards its recent record high levels after the eurozone sovereign debt crisis took another dramatic turn.

Travelex Global Business Payments Malta, freephone: 80073322, www.travelex.com/mt/

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