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Rocky road ahead for the US

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Pound Sterling

After yesterday’s strong gains against the US Dollar, today is a different story. The Pound has weakened due to investors being wary of issues regarding the US debt ceiling. They have now turned their attention to whether US policy makers can come to an agreement to raise the world’s largest economy’s debt limit. The Pound also suffered from traders selling the currency after it peaked above the $1.63 mark.

Against the Euro, Sterling made small gains after the latest manufacturing figures showed that the Eurozone’s output fell. The UK meanwhile posted its strongest results in 15 months.

US Dollar

The ‘Greenback’ has reversed some of the losses it suffered yesterday due to investors seeking a safe-haven as worries creep into the market over the USA’s debt ceiling. The currency made gains against most of its major peers. Investors believe that the US Treasury will exhaust its so called ‘extraordinary measures’ to fund the government by the end of February or early March. After the drama of the ‘fiscal cliff’ we can expect to see further crises out of the US over the coming months.

The Euro

The Euro has taken moderate losses against the ‘Greenback’ and Japanese Yen due to the release of the latest EU manufacturing data which showed that the region was still deep in recession. The Euro fell against the Dollar as investor confidence gave way to concerns about future budgetary rows in Washington.

Markit’s gauge of manufacturing gave an initial reading of 46.3 two weeks into December. Today’s reading has shown the actual figure to be 46.1. That’s 0.1 lower than November’s level and 3.9 below the 50 mark which separates growth from contraction.

Australian Dollar

The ‘Aussie’ has retreated from a two-week high against the US Dollar due to investors seeking safe havens as concern grows that US lawmakers will struggle to agree on raising the nation’s debt ceiling. The Australian currency slid against most of its 16 most traded counterparts as a result.

New Zealand Dollar

The ‘Kiwi’ followed its Australian relative in trading down against the US Dollar as the market turns its attention to the next imminent crisis emerging out of the USA. The New Zealand currency’s losses were limited however; due to the increase in the price of whole-milk powder, one of the nation’s main exports.

Canadian Dollar

The ‘Loonie’ has weakened against the US Dollar but still remains above parity. The decline comes after the euphoria of the successful fiscal cliff negotiations gave way to fears that the US will face even tougher budgetary battles in the months ahead.

South African Rand

The Rand has weakened against the US Dollar due to thin post- holiday trading and the lessening demand for riskier assets. So far this week the currency has been underperforming against many other emerging market currencies. Trading is expected to pick up again next week when most market participants return from their Christmas holidays.