Daily Currency Report

The dollar is likely to be under further pressure as later in the week the BOE will meet to vote on UK interest rates, with the market widely expecting interest rates to rise to 5.75 per cent, following the much closer 5-4 vote in favour not to raise rates earlier in June.

GBP
The reason the pound has surged, following the release of the Bank of England minutes two weeks ago, is because not only was the vote a surprise, but both the Governor and the Deputy Governor of the BOE were two of the members who voted for a rate rise, and it is very unusual for either of these members to be on the losing side.

USD
The dollar was sold off again as traders shunned the currency ahead of tomorrow's holiday. Demand for the dollar started to wane on Thursday after the Federal Reserve left interest rates on hold, stating that core inflation had eased a bit, boosting the view that overnight rates will remain at 5.25 per cent for some time.

EUR
French Farm Minister Michel Barnier tried to take the heat of newly elected President Nocolas Sarkozy, by stating that the euro should be a tool for growth and Europe's political leadership needed to set up a dialogue with the European Central Bank.

JPY
A report out overnight in Japan show large Japanese firms remained upbeat about business conditions in June. The June Tanken, or short-term outlook, came after Friday's soft reading on core consumer prices on the Tokyo area, which had boosted views that the BOJ may raise interest only gradually and dispelled talk of a rate hike later this month.