Fresh worries about European Central Bank policy sent the euro sharply lower after one of the bank’s more hawkish members took comments about possible interest rate cuts a little further than usual. Rumours of a possible ratings downgrade for both Germany and France also made the news, although debt auction in Spain could help repair the single currency by emphasising that demand for eurozone debt still remains strong. Sterling was also damaged, falling to new one-month lows against the euro after an unexpected jump in UK unemployment overshadowed minutes from the latest Bank of England meeting. Global worries should remain the dominant subject in the coming sessions with the latest G20 meeting kicking off. Talk of currency manipulation will probably be a minimum outcome from the meeting and should keep traders in a more cautious mood and favouring the US dollar.

Sterling

Economic data is pointing sterling further south with markets expecting to see a drop in British retail sales heightening concerns about the UK economy following a disappointing rise in unemployment. The ILO jobless rate in the UK surprised investors by moving from 7.8 per cent to 7.9 per cent in the three months to February, weighing on the pound which fell to fresh one-month lows against the euro and at one stage lost about one per cent in value against the US dollar.

US dollar

The US dollar took a broad stride forward and may remain on the front foot as ongoing worries about global growth and commodity prices push the greenback higher and after investors sold the euro aggressively subsequent to comments about possible interest rate cuts in the eurozone. A fall in US stock markets also added to the US dollar’s safety allure, even though the Federal Reserve’s latest Beige Book report spoke fairly optimistically about regional economic activity in the US.

Euro

The euro plunged late, hit by suggestions of an interest rate cut by the European Central Bank and rumours of a possible ratings downgrade for France and Germany. However, the single currency may take back some of those losses as both Spain and France prepare to auction their government bonds. The sales may attract solid demand from investors who continue to seek out higher yields in Europe despite the area’s economic and political uncertainties.

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