Euro and pound hammered

Suggestions that the European Central Bank intends to keep interest rates low for the foreseeable future have driven the euro and the pound down. The single currency is currently trading at $1.2779, having earlier dipped as low as $1.2755. Joerg Asmussen, policy-maker at the ECB, said he expected interest rates to remain at a record low for at least the next twelve months, although the central bank later said his comments were not to be used as guidance.

The euro came under added pressure on Tuesday after Standard & Poor’s downgrade of Italy from BBB+ to BBB. The pound has been hammered by weaker than expected manufacturing figures and is wallowing at a three-year low of $1.4857.

All of this has helped buoy the dollar. Investors seem to be attracted to the greenback as expectations are high that the Federal Reserve will begin curtailing its easy money policy as soon as this year.

However, the strength of the yen could be increased against the dollar if trade data from China shows that the world’s second largest economy is hitting a slowdown.

The big winner at the moment is the Australian dollar. The Aussie is at its highest level in a month against sterling and the euro and is currently worth $0.9166.