The euro managed to produce its best weekly performance since October 2011 before traders decided to book profit on its lofty levels ahead of a critical economic calendar this week. Lower borrowing costs for eurozone governments, combined with upbeat US and Chinese economic data, provided a positive backdrop for the euro’s latest rally that took the single currency close to three-week highs against the British pound. However, that sentiment may vanish quickly over the next few days as Europe’s finance ministers gather again in order to progress solutions to the debt crisis. Markets will be looking for news on the Greek economy in particular and whether or not Athens will qualify for more emergency financial aid. Sterling should continue to remain vulnerable ahead of UK growth data that may show the UK economy contracting in the final months of last year. The Bank of Japan will announce its January monetary policy decision while the US Federal Reserve’s policy-setting committee is expected to sound an optimistic tone which may help encourage more risk taking.

Sterling

The pound regained its composure to an extent after data revealed British retail sales increased by 0.6 per cent over the month in December. The figures were a vast improvement from November’s print and helped sterling steer clear of three-week lows versus the euro.

US dollar

Carry trade activity dominated trading, sending the US dollar tumbling to multi-week lows against currencies with a higher interest rate advantage such as the Australian and Canadian dollars, as well as the euro and pound.

Euro

The euro jumped by almost three per cent against the US dollar before traders decided to book profit on its climb in front of a busy European calendar. Lower eurozone government borrowing costs, in spite of recent credit downgrades, presented the euro with some breathing space in what was its best weekly performance since October 2011. Nevertheless, Europe’s debt crisis will again be a major concern for investors this week, especially troubles in Greece that seem everlasting.

Japanese yen

The Japanese yen has trended lower in recent days as a rally in global stocks tempered demand for safe haven currencies.

Travelex Global Business Payments Malta. (Free phone: 800 733 22) www.travelex.com/mt/

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