Sterling hit the highest levels against the Japanese yen for 2 months after the Japanese authorities intervened to drive the yen lower. Against the US dollar, sterling came under pressure but held on to gains made on Friday and finished the day flat. The big move was against the euro, with sterling surging by close to 2%, hitting a high of €1.1594/£1 after yields (i.e. the borrowing costs paid) on Italian bonds surged – an indicator of investor fear over a potential Italian default as the country struggles to implement tough spending cuts. Out today there is house price data and the first estimate of 3rd quarter GDP for the UK so ensure you don’t lose out and call in to speak to one of the team.

In the euro zone, the euro fell against both the euro and US dollar on poor data and surging Italian bond yields. Figures showed Italian and European unemployment creeping up and lower than expected German retail sales figures. Data has been poor in the last month and many expect the European Central Bank’s meeting to be the main focus later in the week. If the ECB fails to take a looser stance with monetary policy we could see the euro lose ground. Call in now to take advantage of any favourable currency moves.

In the USA, the US dollar jumped to a 3 month high against the Japanese yen following Japan’s intervention in the currency markets over the weekend. Analysts estimated that the Bank of Japan intervened with a record $65-75bn in order to protect domestic exporters from record highs on the currency. The focus for the USA this week continues to be the Federal Reserve’s meeting that starts today. The Fed could potentially implement further monetary easing in the coming months, which could see the US dollar fall.

Elsewhere, tensions between China and the USA took another step yesterday as the USA accused China of failing to implement commitments over the opening of its financial services markets that it made 10 years ago in order to join the World Trade Organisation. The USA accused China of deliberately taking an unduly long time to approve requests by US companies to open branches in the country.

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