Currency movements, particularly for the pound and euro, were largely driven by rumours and speculation. Safe haven buying was outweighed by a fleeting return of risk appetite and the dollar became broadly weaker across the board.

Sterling

Sterling advanced against the dollar fuelled by rumours that the Prudential, Britain's largest insurer, was withdrawing their bid of $35.5 million for the Asian arm of US insurer AIG. However, sterling lost ground when the rumour was denied. The UK shrugged off the Confederation of British Industry's monthly distributive trade survey which took a hit in May, falling to 14-month lows from 13 to 18. In addition, the pound faltered on news that Dubai International Capital requested an additional three months on repaying some of their loans.

US dollar

Fuelled by China's denial that they were looking to diversify their holdings away from eurozone sovereign debt, European currencies strengthened against the greenback. Weekly jobless claims fell to 460k compared to 474k last week suggesting that the labour market continued to improve albeit not as much as the markets had wanted. At the same time the second reading of GDP fell from 3.2 per cent to three per cent, where many had anticipated a rise to 3.4 per cent.

Euro

The euro rose on the exchanges as Chinese officials denied that they were looking to diversify their reserves by selling eurozone bonds. However, that rise was stalled when further media rumours suggested that the Kuwait Investment Authority was also reviewing its euro investments; a rumour which was again denied later.

Japanese yen

The Japanese yen has been the main benefactor of risk aversion in recent weeks. Therefore, it was no surprise that it was abandoned for higher yielding currencies as risk appetite started to creep back into the markets.