Despite better-than-expected economic statistics, the euro and pound sank dramatically versus a stronger dollar on Friday amid bank anxiety.
European banking stocks fell, headed by Deutsche Bank (DBKGn.DE) and UBS Group (UBSG.S), on concerns that the greatest difficulties since the 2008 financial crisis have not yet been resolved.
Euro fell 0.68% to $1.0756 as the dollar index jumped 0.497% to 103.100.
“For many, many years, if there’s perceived or actual problems that appear like they could be deep-rooted, people gravitate to the dollar, and I believe that’s probably all it is right now,” said FXStreet.com senior analyst Joseph Trevisani.
Market confidence was weak, as European banks (.SX7P) fell more than 3%, despite better-than-expected flash PMI data.
“The statistics were better than expected, but the market is risk averse, which is backing another move back to the safe haven dollar,” said Rabobank London Head of FX Strategies Jane Foley.
Despite statistics suggesting the British economy will grow in the first quarter and confidence rising, risk aversion pulled sterling 0.48% down to $1.2226.
In wild trading on Thursday, the Bank of England hiked interest rates by 25 bps to 4.25%. Still, it cautioned a surprise comeback in inflation would probably fade swiftly, fueling speculation it had halted its rise. The pound reached a seven-week high of $1.2341.
The abrupt bankruptcies of two minor U.S. bankers and the emergency sale of Credit Suisse to competitor UBS have damaged banking equities this month.
