Sterling Falls To A Nine Month Low As The Euro Zone's Debt Worries Investors

The British pound fell to nine month low against the dollar as concerns over euro zone sovereign debt problems boosted the appeal of the greenback as a safe haven currency.

Worries about debt problems in the euro zone have extended beyond Greece to Spain and Portugal, hitting riskier assets, with sterling falling in tandem with the euro against the greenback. Last week producer prices data showed further upward pressure on UK inflation, with British manufacturers raw material costs up more than expected last month and continuing to rise at their sharpest annual rate since October 2008. Traders said position adjustment ahead of the weekend accelerated selling of the pound, which has lost close to 2 percent against the dollar this week. The GBP/USD is currently trading at $1.5570 as of 7:14am, GMT, with a bullish trend.

The euro continued to fall this week against the dollar on speculation widening budget deficits in European nations such as Greece and Portugal will deter investors from buying the region's assets. 'As sovereign risks spread in the euro-zone, risk aversion will continue in the market,' said Susumu Kato, chief economist in Tokyo at Credit Agricole Securities, a unit of France's Credit Agricole SA. 'Implications of the financial issues remain unclear, which has weighed heavily on the euro.' European finance ministers said during their weekend meeting they will help ensure Greece tackles its deficit. European governments face a growing dproblem as they seek to strengthen the recovery from last year's recession at a time when rising sovereign debt burdens are worrying investors and threaten to constrain future growth. 'The euro continues to feel the impact of escalating concerns over sovereign credit risk,' Gareth Berry, a currency strategist in Singapore at UBS AG, wrote in a research note today. 'Short euro positions held by futures traders have now reached record levels.' The EUR/USD is currently trading at $1.3660 as of 7:30am, GMT, with a bearish trend.

The (BOC) Bank of Canada painted a more upbeat picture of the Canadian economy last week, raising its growth projection for the three final quarters of this year and estimating inflation to be higher than previously expected throughout the year. In its quarterly Monetary Policy Report, the central bank also said an improved outlook for the U.S. and global economies would help exports grow faster than it previously thought, although the currently strong Canadian dollar is limiting exports."Following weaker-than-expected real GDP growth in the third quarter of 2009, the bank projects that, beginning around mid-year and continuing into early 2011, growth will be slightly stronger than expected in October," it said in the report. The USD/CAD is currently trading at 1.0690 as of 7:41am, GMT, with a bullish trend.

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