Daily currency report

The pound dropped yet again versus the euro as high eurozone inflation figures cemented expectations there will be no rate cuts in the eurozone any time soon and there was even speculative talk of a possible rate hike during this year. More bad data was released in the US as housing starts came in at its lowest level since March 1991, well below analysts' expectations, cementing beliefs for more rate cuts in the US.

Sterling (GBP)
The sterling fell to a record low against the euro for the third consecutive day on expectations that high inflation will keep eurozone rates on hold for the foreseeable future. Conversely, the Bank of England is expected to come under pressure to cut interest rates in order to boost growth.

US Dollar (USD)
The dollar slipped against the yen and continued to be under pressure from a rising euro. The US housing starts fell 11.9 per cent to $947 million, well below analysts' forecasts, shattering the guarded optimism that had been growing in markets in recent days, and cemented further expectation for another interest rates cut during this month's policy meeting.

Euro (EUR)
The euro strengthened to record highs against the dollar after eurozone inflation figures surprisingly came in at 3.6 per cent year on year on the back of surging energy and food prices, suggesting the European Central Bank will not be cutting interest rates any time soon but possibly increasing them.

Japanese Yen (JPY)
The yen fell to its lowest in more than three months against the euro as a rally in Asian stocks gave investors confidence to buy higher-yielding currencies with loans from Japan. The yen plunged versus the South African rand and the New Zealand dollar, favourites for so-called carry trades.

Commercial Foreign Exchange Travelex Malta, freephone: 800 733 22, www.travelex.com/mt/