Daily currency report

The dollar climbed back towards a two-month high versus a basket of currencies as weak economic data in Australia and New Zealand showed more signs of a global slowdown, giving the battered US currency a boost.

Sterling (GBP)

Markets will mainly focus on the PPI data due for release, which is expected to remain near elevated levels. An inflationary figure should give some initial lift to the sterling, particularly after comments from Bank of England member Sentence. Sentence reminded markets that inflation remains his concern by stating that upward commodity price pressures alongside a weakening home currency are two growing flames fuelling upside price risks.

US Dollar (USD)

CPI figures are due out this week and could offset a weak retail sales reading. CPI is expected to remain at elevated levels, while retail sales are expected to slip, suggesting that the Federal Reserve will keep rates on hold as suggested at their April 30 meeting.

Euro (EUR)

The only real slice of data out this week is Q1 GDP growth for Germany and France. However, this data may be misleading as it would probably not capture some of the recent weakness in the eurozone economy as most of it started showing after March. With this in mind, many analysts believe that inflation figures from the eurozone will probably not get much attention from the markets as it will not show a true reflection on the health of the economy.

Japanese Yen (JPY)

Bank of Japan Governor Masaaki Shirakawa stressed again the need to pay close attention to downside risks, but added Japanese rates were already effectively around zero, in comments that reinforced a market view that the bank will keep rates on hold this year.