Daily currency report

The euro continued its strong run after the release of inflation data for the eurozone while the sterling continued to lose ground against the euro and the dollar, the latter recovering some ground with the release of the housing and industrial data.

GBP

The release of the BoE quarterly inflation report confirmed the expectation that another near term 0.25 per cent rise, without which, according to Mervyn King, inflation would continue to rise. He expects inflation to fall back towards two per cent in the final quarter of the year. This was not enough to support sterling which lost ground against the dollar and the euro.

USD

The dollar received a little bit of a reprieve after the release of better than expected industrial output and unexpectedly strong housing starts which rose by 2.5 per cent last month. This positive data prompted speculation that any future rate cut from the Federal Reserve could come later on in the year.

EUR

After Tuesday's strong GDP data the euro received a further boost on the release of higher than expected eurozone inflation data for April, hitting another record high against the yen and an all time high against the Swiss Franc. The market took this to mean that there is a high probability of a rate rise in June and it may not be the last one this year.

JPY

Government data showed that Japan's economy lost a little momentum in Q1, with GDP expanding 0.6 per cent against an expected 0.7 per cent. As expected the CB board left rates 0.5 per cent at the end of their two day meeting, leaving its assessment of the economy unchanged, maintaining the view that the economy will expand moderately.