The pound fell the most against the dollar in 12 years and the euro
weakened after European governments bailed out banks and a report
showed confidence in the region's economic outlook dropped.
The currencies also declined versus the yen after Belgium, the
Netherlands and Luxembourg extended an 11.2 billion euro ($16.1
billion) lifeline to Fortis, the largest Belgian financial-services
firm, and the U.K. Treasury seized Bradford & Bingley Plc, the
nation's biggest lender to landlords. ``It appears that both U.K. and
European authorities still remain reactive rather than proactive in
their response to dealing with the financial crisis,'' wrote Lee
Hardman, a London-based currency strategist at Bank of
Tokyo-Mitsubishi, in a report.
The dollar rose the most against the euro in seven weeks after
President George W. Bush and congressional leaders agreed on a $700
billion plan to revive credit markets.
markets group in Boston at Bank of New York Mellon, the world's largest
custodial bank, with more than $23 trillion in assets under
administration. The Federal Reserve increased its existing currency
swaps with foreign central banks to $620 billion from $290 billion to
make more dollars available worldwide. The European Central Bank, the
Bank of England and the Bank of Japan are among the participating
authorities.
Stress at European institutions had produced a shortage of the
currency, adding to its strength overnight, said Robert Sinche, head of
global currency strategy at Bank of America Corp. in New York.
EUR/USD the pair has established low in area $1,4300, but could
block the most part of the losses later. The pair has finished the
trades of Monday slightly above a level $1,4400.
GBP/USD having established low in the field of $1,7960, the pair was corrected abow a level $1,8100.
USD/JPY having established session high on Y106,90, the rate has
fallen and has finished the trades in the field of a session low on
Y103,95.
European data for Tuesday starts at 0600GMT with German ILO
unemployment data and wholesale sales data. This comes ahead of the
main German labour data at 0755GMT.
At 0900GMT sees September flash HICP data, which is forecast to come in at 3.6% y/y.
UK data at 0830GMT sees Q2 Total Business Investment as well as
the third release of Q2 GDP, which is expected to be flat q/q, 1.4%
y/y. The Balance of payments data is also due and is seen coming in at
-stg9.7 billion. GDP growth ground to a halt in Q2, ending an
unprecedented 63 consecutive quarters of positive growth.
US data starts at 1345GMT with Chicago Purchasing Managers' Index (Sep) . At 1400GMT, the Consumer confidence for September is due.