Stresses in global markets eased somewhat, as investors appeared to take a breather, following days of relentless selling of risky assets. The euro found some short-term reprieve despite mounting worries that individuals in Greece are starting to empty bank accounts in anticipation of a banking crisis. Surprisingly, the euro moved higher against the British pound after UK economic concerns helped deflect some of the markets focus on eurozone risks. The Bank of England lowered its growth forecast again in its quarterly inflation report, even with separate data showing unemployment in Britain falling. Demand for the US dollar also fell following robust US industrial output figures, that helped lessen global growth concerns, while minutes from the Federal Reserve’s latest meeting portrayed a more dovish committee. The global growth picture was also helped by positive Japanese GDP data. Currencies closely tied to growth headlines, such as the Australian dollar and Scandinavian units have found tentative support. Nonetheless, both the dollar and pound remain in touch with recently breached record highs against the generally weaker single currency, as opportunist euro sellers take advantage of market conditions and drive the euro back lower.
Sterling
The Bank of England delivered a more gloomy assessment of UK economic conditions in its quarterly inflation report, keeping alive the possibility of another round of asset purchases which sent the pound tumbling to a four-week low against the US dollar.
US dollar
Above-forecast US economic data gave traders something to cheer and helped ease stock market declines and slow the US dollar’s safety-led advance. Demand for the defensive dollar ebbed as a result and the greenback was strapped further after the Federal Reserve released minutes from its April 25 meeting.
Euro
The euro found some reprieve, albeit short-term, as investors paused to reflect on a period of non-stop unloading of risk that had taken the single currency to four-month and three-and-a-half-year lows against the US dollar and British pound respectively. Still, mounting concerns over political brinkmanship inside Greece could see its international lenders pull the plug on emergency aid that could eventually lead to the country’s exit from the eurozone.
Japanese yen
Japan’s economy grew by one per cent between January and March as the nation continued its recovery from recent earthquake disasters. In currency markets, the yen fell against its most traded peers as traders focused on the reports worrying assessment of export growth which, according to some experts, may persuade the Bank of Japan to continue easing monetary policy.