Appetite For Risk Returns Triggering A Shift Out Of The Yen And The US Dollar

Modified: Thursday, 7 June 2012 17:08 BST - Written by John Cameron

STORY LINK Appetite For Risk Returns Triggering A Shift Out Of The Yen And The US Dollar

Today’s session in the currency markets has been marked by a surge in global appetite for risk, which has been triggered by an unlikely source – Mario Draghi, the President of the ECB. Draghi used his post-ECB rate decision press conference to hint that Europe’s central bank is considering an easing of monetary policy in an attempt to actively tackle the eurozone’s current economic woes. Draghi suggested that Europe may be considering indulging in its own bout of Quantitative Easing, whilst also stating that several ECB board members had come out in favour of a cut in interest rates in the region. The comments proved highly supportive for the euro, sending the GBP EUR exchange rate down into the low 1.2300 and providing some rare reason for optimism for clients holding euro-denominated assets.

The mere suggestion of more ‘easy money’ had institutional investors straining at the leash to get involved in riskier asset classes. This sent Europe’s stock indices spiralling, with London’s FTSE 100, Frankfurt’s Dax and Paris’s Cac 40 all closing up by over 2%. This spelled bad news for the safe-haven US Dollar, which had been the flavour of last month. As investors regained their nerve, the Dollar came under increased selling pressure, sending the GBP USD exchange rate back up towards the 1.5500 level. Meanwhile, the safe-haven Japanese Yen has also suffered on the session, with the GBP JPY exchange rate gaining over a per cent on the day to stand at 122.43.

Elsewhere, The Pound suffered a relatively poor session, following a weak showing for this morning’s PMI Construction sector survey. The figure showed that Britain’s construction sector expanded at a slower rate last month than it had in April.

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