Daily currency report

The sterling had an impressive day ending the session higher across the exchanges. Elsewhere, Inflationary pressures are beginning to worry China's CB, which indicated that it will soon tighten monetary policy again following consumer price inflation which hit 4.4% in June.

GBP
The BoE signalled that interest rates will need to rise to 6% in order that inflation will hit the target of two per cent within the next two years, giving the pound a significant boost, allowing sterling to end the day up against the dollar, the euro and the yen. However, strong pound consequences are likely to be felt with the release of UK trade data. Most analysts predict a deficit widening, with sterling strength rendering imports cheaper and exports expensive.

USD
The dollar lost ground against both sterling and the euro, as concerns still linger over the fallout from the problems in the US sub prime mortgage market. Furthermore, the Fed has reiterated that it's focusing on inflation, meaning that there will be no monetary policy easing to boost the economy.

EUR
The euro lost ground against the pound, but held steady against the other majors as traders continued to price in the probability of an ECB rate hike in the coming months. Trade data from Germany did highlight the effects of a stronger currency, with cheaper imports rising to record levels during June.

JPY
Japan's core private sector machinery orders fell by more than expected in June, signalling a slowdown in corporate capital spending, but did little to alter market expectations the BoJ will raise interest rates this month to 0.75 per cent.

Commercial Foreign Exchange Travelex Malta, freephone: 800 77 33 22, www.travelex.com/mt/