Monetary policy will dominate trading this week with interest rate announcements due from the Central Banks of Norway, Switzerland, Japan and the United States. Attention will naturally focus above all on Japan as policymakers try to come to terms with one of the worst natural disasters on record. Given that interest rates in Japan are already at 0-0.1per cent investors will be counting on the Bank of Japan to take steps to assure that markets remain sufficiently liquid.

Sterling

Sterling continues to see losses against the euro, but has stabilized trade against the US dollar. The pound continued to come under pressure after the PPI data released was seen more or less in line with market expectations. Sterling’s direction is likely to be influenced by developments in the eurozone and Japan.

US dollar

Currency movements against the US dollar have less to do with dollar gains or losses and more to do with what is going on in the respective regions. The euro is trading higher against the dollar because EU leaders came together over the weekend to hammer out details over its competitiveness pact. The pound is trading lower from last week’s levels because of the decision taken by the Bank of England to leave interest rates on hold. The economic data released in the US offered very little support as US retail sales figures were in line with expectations, while the University of Michigan consumer sentiment survey was released at five-month lows.

Euro

The euro is seeing support against most major currencies. EU leaders meeting over the weekend appear to have come together on a competitiveness pact. The agreement paves the way for future negotiations over the European Financial Stability Facility. Already leaders agreed to increase the facilities capacity by the end of the month and extended the timeline for Greek credit lines to seven years.

Japanese Yen

The Nikkei 225 share index has plunged seven per cent as markets attempt to come to terms with the events of last week. Whilst Japan was physically prepared to deal with an earthquake, the scale of the damage both in human and in nuclear terms has been overwhelming. Furthermore, the disaster has put even more pressure on an already struggling economy. Firstly, the earthquake and tsunami have pushed up the value of the yen as investors and insurers repatriate funds to deal with the aftermath.

Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/

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