The currency blog

It is fair to say that the euro has been well and truly smashed over the last few trading days and is on the ropes. The 1.40 level on EUR/USD is today in sight which is a 7% fall from the December highs. The demise of the euro was triggered with the economic Greek tragedy and has since been hit with a return to risk aversion which is triggering buying of USD and JPY. Concerns are increasing on the maintainability of the ever expanding growth in China and fears that China will act further to slow the rampant growth by raising rates. This has taken a lot of risk off the table in the Far East and Australasia and we have seen weakening of the commodity currencies to tie in with this- in particular the Aussie dollar. GBP/EUR is hovering around the 1.15 level- a further fall in EUR/USD would lead it cleanly through the 1.15 level. The euro will not be helped by slightly weaker than expected Eurozone PMI this morning.

Today data from the UK confirmed that the Public Sector net borrowing came in lower than expected but still at record highs. Still the fact that it has reduced will be a great relief following December’s horrific numbers. This was not enough to stop a sharp sell off in cable this morning which has dropped from just under 1.63 to 1.6150.

Later today from the US we have weekly jobless data which will provide further clues to the US labour market, especially necessary after the weaker non-farm payrolls earlier in the month.

Discuss on this on the Currency Exchange Forum