Daily currency report

With extremely quiet markets, the dollar remains mired near a 26-year low against the sterling as investors await interest rate announcements from key CBs due out. While the ECB is expected to keep rates on hold, the BoE is widely expected to increase rates to 5.75 per cent.

GBP
The BoE's MPC will vote on whether to increase UK interest rates. With a 25bp increase priced into the markets, traders will be on alert for further indications as to the future direction of monetary policy. The only outcome that would satisfy analysts will be language that alluded to more rate hikes to come.

USD
With North America closed for Independence Day, the markets were very quiet making the release of non-farm payrolls report tomorrow ever more important, as the housing market is still struggling. The Fed will only shift away from its cautious monetary policy bias and consider lowering interest rates when job growth falls below 100,000. If companies stop hiring, then the US economy is in serious trouble.

EUR
Having raised interest rates last month, the ECB is widely expected to keep rates on hold this month. Like the UK, the euro zone faces inflationary pressures that warrant higher interest rates, but the strong euro level may give the CB flexibility to wait until later in the year to increase rates.

JPY
With no data released in Japan, demand for carry trades remains strong. The euro yen paring fell just short of hitting a new record high. Leading indicators due for release are expected to improve.