The euro is opening a little weaker as the data calendar is relatively lacklustre compared to next week’s line-up, which includes the European Central Bank policy meeting, US non-farm payrolls and PMI surveys from around the world. In the meantime, comments from policymakers and data continue to toss currency markets around. M3 money supply figures will be released in the eurozone and the data is monitored for private loan growth which has been stuck in negative territory, much to the dismay of the ECB. Weak loan growth is expected to continue and may hold the euro down. As for the UK, inflation is stuck at a four-year low and has pushed back expectations for a rate increase. Consumer demand figures are expected to see gains, but given weaker surveys released from the BRC and CBI, investors might not be too surprised to see a weaker-than-expected release. The risk therefore is to the upside. A better figure could see sterling continue to take back losses. Sterling moved higher on speculation that foreign investors where in buying shares of Lloyds that where being sold by the government.

Sterling

Sterlling has managed to take back some of its losses in the run up to the release of inflation figures seen earlier this week. Profit taking on short positions found momentum when Lloyds related bids came into the market. The government has sold £4.2b worth of shares and as a result, many speculate the bids came from investors abroad.

US dollar

Durable goods data was both good and bad. The headline increase of 2.2 per cent was certainly better than expected and did not hurt the US dollar. Rather digging into the release revealed business spending actually dropped 1.3 per cent. Attention will turn to the pending home sales, which figures could be slightly more interesting after this week’s new home sale purchases fell 3.3 per cent.

Euro

German GfK consumer sentiment was in line with forecast while Italian sentiment jumped to a three-year high. The lift for Italians came as the new government took over this month. While all well and good, the data continues to have very little impact on the currency markets, since it continues to paint a similar picture of the eurozone economy. What does seem to be moving markets is the constant barrage of dovish comments from ECB policymakers. The threat here is that these comments are setting up expectations for more policy action at next week’s meeting. That is increasing selling pressure on the euro, but now the risk is that if the ECB decides next week to leave its policy in place, traders will be sitting on the wrong side of the proverbial fence, creating a backlash in the euro.