Sterling fell against the US dollar on Monday, mirroring the euro’s drop against the US currency as concerns over the euro zone’s huge debt problems continued to concern investors globally. Sterling – whilst a preferred option to the euro – is still seen as a riskier investment given the likelihood of further quantitative easing and a clouded outlook for the recovery. It was a relatively quiet data for data, with most investors holding out for the Bank of England’s quarterly inflation report, released on Wednesday. Markets will be looking for any signs of further downside risks for sterling and some analysts expect the UK’s growth outlook to be cut. Employment and retail sales figures later in the week could also weigh on sterling’s prospects – call in now for a live exchange rate to avoid losing out due to adverse market movements.

In the euro zone, there was a slight glimmer of hope yesterday after it was announced over the weekend that former European Commissioner Mario Monti would head up a new Italian government in order to end a crisis that has engulfed the whole euro zone. However, this optimism was short lived as Italy paid a record level of interest on a new 5 year bond auction and industrial production in the region recorded its biggest drop since the beginning of 2009, falling by 2%.

In the USA, stock markets fell as investors became unnerved by the Italian bond auction and sought safer havens in alternative asset classes. US government bond prices rebounded as markets looked to them as a safe haven. With the Swiss franc and Japanese yen no longer a viable option for investors after government intervention, the US dollar has become the only real ‘go-to’ on this front.

Elsewhere, the price of gold dropped on concerns over the euro zone crisis. It is generally indicative of the level of concern that if gold prices are dropping, investors really are worried. Around the time of the Lehman Bros, gold fell significantly. This is an interesting one to track with regard to market sentiment.


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