Daily Currency Report

Market overview

US interest rates moved above the UK interest rates for the first time in five years. While the ECB may increase rates, the BoE has clearly signalled that it is going to maintain a wait and see policy. The sterling seems to be under pressure from this increasing differential as the euro goes from strength to strength.

GBP
The Bank of England policymakers signalled that they were in no hurry to move interest rates as risks to inflation were balanced.

USD
The Federal Reserve reacted to rising inflation and the strength of the US economy. The dollar fell the most in more than a week against the strengthening euro and dropped versus the yen and Korean won.

EUR
IFO data last week showed German business sentiment at a 15-year high. Coupled with the increasingly hawkish rhetoric from the ECB, an increase in interest rates is likely.

JPY
The yen is under pressure, slipping to a three-week low against the dollar and a four-week low against the euro.

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