The US dollar is coming under significant pressure once more following reports eurozone leaders will announce a major step forward in reinforcing the region’s safety net at a meeting between finance ministers over the next two days. The news would represent a major breakthrough in Europe’s three-year long fight to end the debt crisis. As a result, traders dumped the safer greenback in favour of more risky bets, a process which was already underway after data on US weekly jobless claims stood in contrast to recent concerns about the health of the global economy. The pound rallied close to five-month highs, giving sterling traders a real opportunity to top-up their currency accounts in spite of poor UK economic data. The yen on the other hand continued its recovery this week based on improved fundamentals as Japanese data showed a pick-up in inflation that may just encourage the Bank of Japan not to adopt more monetary easing.
Sterling
Mortgage approvals fell to eight-month lows in February according to official data released in another worrying sign the UK economy will not only require more Bank of England stimulus, but could also be slipping towards a double-dip recession. The figures reflected both weaker demand and tougher bank lending, conditions that continue to eat away at the country’s economic prospects. Although the data would normally have weighed on the pound, the British currency surprisingly held firm, even managing another shot at four-month highs against the US dollar as investors shut-out positions ahead of the quarter-end.
US dollar
The US dollar came under pressure following better-than-expected US unemployment data that helped lighten safe haven demand, and reports eurozone leaders are preparing to make a major announcement regarding the region’s emergency rescue funds. Weekly US jobless claims fell to fresh four-year lows last week, giving investors something to cheer after a number of headlines this week that have fuelled global growth worries.
Euro
The euro edged higher on reports eurozone finance ministers are preparing to announce a major breakthrough on expanding the region’s financial safety nets at a meeting in Copenhagen. A draft statement obtained by the media confirmed that leaders are planning to let this year’s upcoming permanent rescue fund, the European Stability Mechanism, to run side-by-side with the group’s temporary firewall, the European Financial Stability Facility until 2013. The move could potentially boost the emergency pot for indebted countries.