Sterling’s fortunes reversed this morning as the pound slumped to a one-week low against the dollar and fell against the euro. This is all down to investors’ prudence ahead of the release of UK public finances data, as well as a few other ominous rain clouds such as the UK’s fiscal health and the small matter of this year’s impending election.

Pound Sterling – UK Markets

The pound’s gains this week ground to a halt this morning as it dipped to a one week low against the US dollar. At 0856 GMT, sterling was down 0.6% against the greenback to hit a one-week low of USD1.6186. By 0935 GMT the pound traded around USD1.629. Despite a slight drop, the pound still hovered near a five month high against the euro, trading around 1.154 at the time of writing. In addition to the public finances and UK money supply data, market players will have their eyes on a Confederation of British Industry industrial trends survey, due at 1100 GMT.

US Dollar – US Markets

The US dollar continues to climb against its rivals as risk aversion appears to be on the rise. The dollar has made significant gains against the euro by reaching a price level below 1.4100 for the first time in over 20 weeks, the pair traded at 1.4114 at 0941 GMT. The greenback also managed a recovery against the yens recent surge by reaching back to trade at USD/JPY91.491 at 0942 GMT.

Euro – European Markets

The euro’s misery continued this morning as stocks trade lower, risk aversion took the lead and safe-havens like the dollar and the yen gained support. The single currency traded at EUR/GBP 0.866 and EUR/USD 1.411 at 0945 GMT. The Euro-Zone's and Germany's ZEW Economic Sentiment report showed a fall in consumer/business optimism throughout the region. Italy's trade balance was worse than expected whilst Greece's sovereign debt situation remains a thorn in the side of the euro. Today presents some opportunities for a rebound, but there’s also a chance that a poor showing could poison confidence even further.

Other Currencies – Highlights

The safe-haven yen continues to drag down much of the other major pairs and has put heavy selling pressure on the euro. Meanwhile the progress of the USD/CHF pair, which has remained bullish this week, seems to be grinding to a halt according to chart watchers.