Daily currency report

The sterling and the dollar suffered similar fates as inflation readings continued to go down. Meanwhile, the euro strengthened, as strong growth data supported the view that interest rates in the Eurozone are on their way up.

GBP

The sterling came under pressure after the release of CPI for April. CPI rose by 0.3%, denting the case for further interest rate rises, justifying the BoE rates increase by 0.25% only. As the market reassess the certainty of another hike, the sell off we have seen in recent days could be set to continue.

USD

The dollar fell across the board after a report showed that US Consumer Prices rose by only 0.4 per cent in April against an expected 0.5 per cent. The core rate of 2.3 per cent year on year was the lowest in a year. The Federal Reserve Bank will now have to cut interest rates later in the year to stimulate growth.

EUR

The euro rose to another record high against the yen, while benefiting from inflation data out from the US and the UK, gaining ground against both currencies. Even though inflation remains around 1.8 per cent, evidence of solid economic expansion leaves the ECB room to increase rates further.

JPY

After the disappointing Japanese Machine Orders the yen continued to lose ground as expectations remained that interest rates would only be raised gradually, although it managed to recover towards the end of the day to finish flat. The bank is expected to leave interest rates on hold at 0.5 per cent but investors will be looking for clues about whether another increase could be seen as early as June or July.