The euro soared alongside risky assets on optimism Greece was preparing to vote and agree on austerity measures which would see Athens receive its next instalment of emergency aid. The prospect of the debt-loaded nation avoiding a messy default, which would almost certainly trigger another financial crisis, boosted emerging-market and commodity-linked currencies. The US dollar may therefore bounce-back, after suffering further from dovish comments from Ben Bernanke, head of the US Federal Reserve. Speaking in front of US lawmakers, Bernanke appeared to suggest more quantitative easing is still being considered which sent the greenback reeling to November 15th lows against the British pound. However, sterling’s rally against the dollar will be in danger of profit-taking before the Bank of England’s crucial policy meeting.
Sterling
Sterling surged to its highest level since November 15th against the US dollar after comments from the US Federal Reserve’s Ben Bernanke suggested the Fed is still considering flooding the markets with more dollars should US economic conditions falter. While US concerns and optimism over Greek debt talks may help the pound hang on to gains, the possibility of more quantitative easing following the crucial Bank of England meeting could easily unsettle sterling-traders.
US dollar
Optimism Greece was making significant progress towards meeting conditions attached to its next allotment of bailout money helped lift market sentiment, encouraging investors to unwind safe haven US dollar positions in favour of higher yields. As a result, the greenback tumbled to fresh multi-month lows across the board, hampered further by dovish comments from the US Federal Reserve Chairman, Ben Bernanke. The prospect of near-zero interest rates until 2014 and more money-printing remain, according to most analysts, after Bernanke warned Congress that the US economic picture is far from normal and delays over tax cuts present a major risk to businesses.
Euro
The euro soared to two-month and one-week highs versus the US dollar and pound respectively on hopes Greece may finally meet demands set out by the European Union, International Monetary Fund and the European Central Bank. The group of creditors, have made clear that Greece must enforce more painful austerity measures before being granted its next emergency bailout fund, without which Athens would suffer a chaotic default as early as March.
Japanese yen
The Japanese yen fell sharply alongside the US dollar as investors dumped safer assets in anticipation of Greece ending months of speculation by agreeing to implement harsh austerity measures which were put forward as part of its second emergency bailout.
Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/