Currency markets are taking a “risk-off” stance to trade, which is supporting safe haven currencies such as the Swiss franc and Japanese yen, while riskier currencies such as the Aussie and New Zealand dollar have seen losses.

Sterling

Sterling rose to a 13-month high against the US dollar. MPC members giving testimony to the Treasury Committee over February’s inflation report did not reveal anything markets did not already know and as a result, investors latched on to economic data released. The data supported the view that interest rates may need to tighten and thus supported sterling.

US dollar

The dollar’s rise on the back of less dovish comments made from Fed Chairman Ben Bernanke and a seven-year high seen in the ISM manufacturing survey could be short lived, if economic data fails to paint the more upbeat mood reflected in Bernanke’s testimony.

Euro

The euro is likely to find some support going into the European Central Bank MPC meeting. While markets widely expect the central bank to leave rates on hold, investors will also be looking for signals that the bank is winding down extraordinary measures which it took to support the economy.

Japanese yen

The safe havens such as yen, the Swiss franc and gold are making gains as global equity markets fall. The price of oil has risen to two and a half year highs on concerns over the escalating tensions in the Middle East. The rise in oil prices has investors concerned that the fragile global recovery could be debased by higher commodity prices.

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