Daily currency report

Sterling gained ground versus the dollar and the dollar itself also posted gains against the euro and yen following the release of the minutes of the previous Federal Reserve committee meeting. The minutes hinted that the US might need to increase interest rates over the coming months to curb inflation.

GBP

Sterling rose against the US dollar and the yen; boosted by strong retail sales figures and a report from a newspaper about possible tax breaks for UK-based firms (they might be able to repatriate profits from their overseas operations tax-free).

USD

The dollar briefly gained ground versus the euro after the release of the minutes of the previous FOMC (interest rate setting committee) meeting showed that interest rate increases might be needed to control inflation. It wasn't solely a positive statement regarding the outlook for the US economy, however, as it contained comments about uncertainty in the outlook for both growth and inflation.

EUR

The euro rose to a two-year peak against the dollar and an all-time high versus the yen on hopes that the ECB will signal that interest rates need to rise further when the rate announcement takes place. The ECB will doubtless keep rates on hold at 3.75 per cent after its policy committee meets at lunchtime today.

JPY

The yen took a bit of a hammering from the US dollar and remains extremely weak versus the pound and euro. A report from the Nikkei Business Daily said that the BoJ will forecast core CPI growth of around 0.2 to 0.3 per cent for the fiscal year of 2007/8 in its twice yearly economic and price outlook report published later this month.