Daily currency report

Currency trading remained within recent ranges with traders and investors alike reluctant to take up positions prior to this week's key interest rate announcements.

GBP

The sterling strengthened against a broadly weaker euro but stayed flat against the dollar ahead of an expected interest rate rise due out in the UK. With core inflation still running at three per cent, well above the bank's two per cent target, traders have already fully priced in a quarter point rate hike. This will take the UK's borrowing costs above those in the US to 5.5 per cent.

USD

The dollar ticked lower ahead of the three CB meetings that could underscore market expectations for the US interest rates to fall this year as the rates in other major economies rise. Although the US is expected to keep rates on hold, traders will be focusing on the Fed's accompanying statement for any indications that they are growing concerned about the economic downturn and may seek to stimulate growth. This would indicate an imminent rate-cut and most probably be dollar-negative.

EUR

The single currency was broadly sold-off as traders seized upon comments from Germany's Finance Minister, Peer Steinbrueck, as he tried to talk down the value of the euro. Analysts believe there will be no change today to the current rate of 3.75 per cent, although ECB chief Jean-Claude Trichet is expected to signal a further increase in June.

JPY

With no significant data out in Japan, the focus has been on the USD, GBP and EUR. The BoJ reiterated earlier this week that they will be raising interest rates gradually through the year as the economy continues to expand.