Daily Currency Report

The sterling hit a two-and-a-half-month high versus the euro and dollar respectively as expectations grew that the BoE could raise interest rates as soon as this week.

GBP

The sterling ended the day slightly down against the dollar, but held firm against the euro as investors' attention turns to the BoE's monetary policy committee's two-day meeting. Data released gave further support to the view that the British economy would be able to tolerate a further hike to 5.5 per cent as both the housing market and economic growth prospects appear to be in rude health.

USD

Thin trading conditions, stronger economic data and subsiding tensions in the Middle East edged the dollar higher versus the other majors on what was a quiet trading day. The regional Fed president made it clear that the economy would need to weaken far more significantly before he would be willing to sanction an interest rate cut, giving carry traders the green light to further build their positions.

EUR

With February data trickling in, we have finally begun to see the VAT increase hit the German economy. Surprises we saw in January are now beginning to fade, but even so, the impact has not been as deep as many analysts may have predicted. For that reason, the ECB still has justification to raise interest rates again this year.

JPY

The yen is still hugely under pressure as Japanese institutions start to rebuild their overseas investments at the start of the fiscal year. The weakness of the Japanese yen has put carry trades back in play.