Daily currency report

Since Monday's geopolitical interference that temporarily distracted the FX markets, there has been a return to monetary policy and "interest rate differentials" as the guiding factor for a currency's direction.

GBP
The Sterling gained strength despite the slightly less aggressive tone of the minutes from the Bank of England. The committee voted seven to one to leave rates unchanged. There was concern surrounding that weakness in overall global markets may spark a deceleration in inflation.

USD
The dollar was little changed against the yen after fear that economic report data may add to signs that higher US borrowing costs are slowing growth. The dollar's weakening trend is the one that's likely to dominate.

EUR
The euro strengthened against sterling and the dollar as European Central Bank President Jean-Claude Trichet signalled interest rates will rise to contain inflation. The euro has gained 6.8 per cent against the dollar and four per cent versus the yen this year as traders raised bets the central bank will lift borrowing costs at least twice more by December.

JPY
The yen climbed against the dollar for a second day after the BoJ chief signalled the central bank is on course to lift interest rates for the first time in six years, possibly as soon as July.