The British Pound continued to decline against the U.S. Dollar, traded at a one-month low versus the Euro and also weakened against the remainder of its Forex peers following the release of Halifax Data which confirmed that home prices fell 0.6% last month. In addition, Rightmove PLC advised that sellers would have to reduce property prices in order to attract buyers. All these factors have raised speculation that the Bank of England may increase its asset-purchasing program.
Meanwhile, the U.S. Dollar dropped against the majority of its money market counterparts as risk appetite increased after Germany agreed to back the European Central Bank’s plan to buy bonds.
The Euro exchange rate weakened versus the greenback and the Yen as Italian Prime Minister Mario Monti suggested that serious divisions between E.U. member nations could threaten the bloc’s existence. The impasse that now threatens to break-up the E.U. has to do with assistance for Italy and Spain. The Euro recouped some of its losses after German Chancellor Angela Merkel backed the ECB proposal to buy government bonds in order to lower borrowing costs.
Lastly, The Australian Dollar inched close to more than a four-month high on speculation the Reserve Bank won’t cut interest rates. New Zealand’s Dollar also gained following a rally in Asian stocks thereby increasing demand for high-risk assets. Gains for both currencies were limited due to renewed concerns that the European crisis is dampening growth.