Daily Currency Report

It was no surprise that the Federal Reserve increased US interest rates to a level of 5.25 per cent, but what was not foreseen was the tone of the statement accompanying the increase, as it appeared to signal that a pause in monetary tightening is imminent. Soon after this news, the sterling, the yen and the euro had all picked up a little versus the dollar.

GBP

The pound opened slightly higher against the US dollar following the statement from the Fed, however, there was not such good news versus the euro as the sterling reached a two-month low.

USD

Due to the raise in interest rates to 5.25 per cent, the dollar was sold off against the majors. The fed acknowledged moderating economic growth in the US but also noted that "inflation expectations remained constant". The revised final first quarter GDP figure showed that growth in the US economy increased from Q1 last year to a level of 5.6 per cent.

EUR

Without the eurozone economy having to do very much, the euro has managed to gain ground against both the sterling and the dollar. The euro now finds itself in a position of some potency as a likely interest rate hike in the eurozone next week could further cement its position of strength.

JPY

The yen was a big winner as it appreciated against the pound and the dollar, not only because of the Fed statement but probably had just as much to do with the positive data releases from Japan. Japanese Core CPI rose firmly in May while the jobless rate fell to an eight-year low.

Compiled by Commercial Foreign Exchange Travelex Malta. (Free phone: 800 77 33 22) www.travelex.com.mt