Sterling fell against its major counterparts Tuesday as renewed concerns over the nuclear crisis in Japan caused risk aversion to sweep through nervous markets.
The pound fell to a four-month low against the euro as investors’ expectations for early interest rate hikes from the Bank of England dissipated in contrast to that of the European Central Bank, which look certain to raise interest rates at the beginning of next month.
Sterling also hit a 2 1/2 month low against the Swiss Franc as safe haven demand continues to increase in the aftermath of the Japan crisis.
Key data to look out for today is the jobless claims change figures released from the UK at 09:30.
The euro dropped off against the yen and came under slight pressure against the dollar on Tuesday. This is because of a widespread sell-off of risky assets as Japan's nuclear crisis looks to be a far from over. The fallout from last week's catastrophic earthquake in Japan was being felt around the world, as stock markets plunged and commodity prices moved lower on concerns over global demand.
Germany's economic sentiment weakened unexpectedly in March, as the hint from the European Central Bank on a possible rate hike and severe earthquake in Japan weighed on the assessment of financial market experts. At 14.1 points, the indicator of economic sentiment was down by 1.6 points from February and marked the first decline since October 2010
Portugal became the third Eurozone to receive a downgrade from Moody's this month, following on from Greece on March 7th and Spain on March 10th. Moody's cited implementation risks for the government's ambitious fiscal consolidation targets, the ratings agency downgraded long term government assigned a negative outlook. This could mean a further cut in the coming years.
The dollar held its ground against the majority of its most traded counterparts during Tuesday as the US Federal Reserve maintained its ultra-loose monetary policy. The US Central Bank has stated that the economy is gaining traction. However, there are potential inflation risks arising from rising food and energy prices. Today's major economic data releases out of the US come in the form of the Producer Price Index and Housing Starts figures, released at 12:30.