Sterling rose against the US dollar, supported by encouraging UK service sector data. Improving risk appetite saw investors dump the US dollar in favour of the higher yielding euro.
Sterling
UK service sector activity surprisingly beat expectations and expanded on the month in September. CIPS services PMI rose to 53.8, above August’s 52.1. However, similar to other surveys, the forward looking component showed that businesses remain pessimistic about future activity. The news helped boost sterling against the under-pressure US dollar, rising to almost two-month highs. Despite this, sterling remains close to recent four-month lows against the euro.
US dollar
Investors continued with recent bets against the US dollar as expectations of further US quantitative easing increase. Following the Bank of Japan’s move to expand their asset purchasing schemes, it seems many investors are almost certainly expecting the US Federal Reserve to do the same. As a result the US dollar tumbled across the board, reaching eight-month lows against the euro and almost two-month lows against sterling.
Euro
The euro traded close to eight-month highs against the US dollar as rating agency Moody’s, stated that they are impressed with Greece’s push to improve public debt. Disappointing data failed to put a dent in the single currency’s rise with both retail sales declining and service sector growth slowing.
Japanese yen
As expected, the Bank of Japan eased monetary policy even further in order to boost economic activity and weaken the yen. The Bank of Japan cut interest rates and expanded quantitative easing schemes in order to lower borrowing costs and further stimulate the economy. However, the size of the expansion disappointed markets as it was less than previous levels.
Commercial Foreign Exchange Travelex Malta, free phone: 800 733 22, www.travelex.com/mt/