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Unrelenting eurozone crisis taking its toll on the pound

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Pound Sterling

The Pound has fallen against the US Dollar as a fairly empty UK economic calendar for October leaves the currency at the mercy of international trends. The Eurozone crisis continues to drag down on the Pound as risk aversion once again sees the markets seeking shelter in safe havens like the Japanese Yen and US Dollar. The key factors for the Pound this week will be the outcome of the two-day finance ministers meeting in Luxembourg and the G7 finance ministers meeting on Thursday.

US Dollar

The ‘Greenback’ has made gains against the Pound and Euro as the demand for the safe haven currency grows. Worries over the state of the global economy have worried investors and with the Euro crisis being dragging on, investors have begun to lose patience. Spain has still not requested a bailout and today’s two day meeting with Europe’s finance ministers in Luxembourg is not expected to yield any positive results. Today is a national holiday in the US, Columbus Day so data releases will be few on the ground as it is a bank holiday.

The Euro

The Euro has fallen against all of its major peers ahead of the release of data that could show that Germany’s industrial production has fallen. If the figure shows a further contraction then the single currency will suffer more as the markets regard it as further proof that the Eurozone’s debt crisis is worsening. Economists are predicting that production will show a decrease of 0.6% in August, the biggest drop since April.

The markets are also losing patience with the Eurozone’s leadership as today’s Euro finance ministers meeting in Luxembourg is not expected to provide any significant breakthroughs.

Australian Dollar

The ‘Aussie’ has weakened against most of its peers following the encouraging jobs data out of the United States and the expectation that the Australian Reserve Bank will have to make further interest rate cuts . Some economists are predicting that the currency could move close to parity with the US Dollar over the next few weeks. The demand for safe haven currencies has impacted heavily on the more risky commodity based currencies contributing to the ‘Aussie’ weakening.

New Zealand Dollar

The ‘Kiwi’ has followed its Australian cousin in trading down against a basket of currencies due to the weak demand for riskier commodity based currencies. The strong momentum of the US economy and the surprisingly strong showing from Republican candidate Mitt Romney in the first presidential debate has caused some traders to believe that if Romney wins then the Federal Reserve’s policy would have to change, a situation that would benefit the Kiwi.

Canadian Dollar

The ‘Loonie’ ended last week at a two week high against the US Dollar thanks to stronger-than-expected jobs figures out of the US and a far better-than-expected result by the Canadian jobs sector. US unemployment fell close to a four year low of 7.8% in September whilst the Canadians added an extra 52,100 job’s to its economy, almost all of them full-time which bolstered Canada’s case for an eventual interest rate rise. Despite all of the positivity out of North America the ‘Loonie’ today has weakened against a basket of currencies on the back of risk aversion over Europe.

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