Sterling’s decline against the US dollar continued as concerns about the global economic outlook once again dominated trading. However, the euro ultimately proved to be the main loser, dropping by over two per cent against the greenback.
Sterling
Sterling hit a two-week low against the US dollar as concerns about the health of the global economy prompted investors to scale back riskier trades. Against the euro, however, it was a different story with the pound benefiting from broad-based weakness in the single currency to post impressive gains. The outlook for sterling has changed dramatically, as first the US Federal Reserve and then the Bank of England cut their growth forecasts.
US dollar
The US dollar enjoyed another impressive session as fears over global growth prospects boosted the greenback’s perceived safe-haven allure. Tuesday’s downgrade by the Federal Reserve of its outlook for the US economy proved to be the catalyst for this flight to safety, and weak European Industrial Production data as well as a similar economic downgrade from the Bank of England have served only to exacerbate the moves. Yesterday’s session promised to be hugely significant once again with retail sales, consumer prices and consumer confidence data all up for release. These reports will go a long way to either confirm or contradict the Fed’s downbeat economic assessment.
Euro
The euro came under sustained pressure yesterday after disappointing eurozone data. Industrial production fell considerably below expectations and weighed on the single currency. Concerns over peripheral eurozone countries again surfaced, adding further pressure, with Ireland, in particular, struggling to borrow money in financial markets. Trading was driven by results for Q2 from across the zone. The overall reading for the zone as a whole is expected to show positive growth levels, driven largely by a strong performance from Germany.
Japanese yen
The Japanese yen opened lower against the euro, sterling and more importantly, sharply lower versus the US dollar. The yen’s rise was brought to a halt on more developments on the possibility of central bank intervention. News circulated that the BoJ was unusually calling banks to ‘check’ on USD/JPY prices. The Japanese Prime Minister and BoJ governor may also meet next week to discuss the yen’s rise and markets’ fear action maybe taken.
Commercial Foreign Exchange Travelex Malta, freephone: 800 733 22, www.travelex.com/mt/