Daily currency report

Sterling was allowed a brief respite following improved inflation figures, which shifted investor's attention away from media speculation, and the polls supporting it, into the possibility of a hung Parliament. Sterling was allowed a further boost off the back of improving risk appetite, much to the detriment of the US dollar's recent run. Q2 earning seasons began exceedingly well, as earnings from many conglomerates surprised markets to their upside, including the headline grabbing Goldman Sachs. In Europe, European Central Bank governing council member Axel Weber fired up further fear by stating that the level of fiscal support for Greece will look to top out at the €80 billion mark.

Sterling

Sterling saw the benefit of improved investor confidence following better than forecasted inflation figures. While inflation figures were forecasted to see an improvement to 3.2 per cent y/y, from last month's figure of three per cent y/y, markets were surprised to the upside as inflation was seen to hit the 3.4 per cent y/y. Although the Bank of England does set their target inflation level at the two per cent y/y level, these figures were resoundingly sterling supportive, as investors began to speculate that interest rates could be raised from their current historic lows as soon as Q4 this year.

US dollar

The greenback waned as a greater risk appetite saw investors exiting out of the safe haven US dollar. The dollar has been recently buoyed by fears surrounding the SEC investigations into allegations of fraud by Goldman Sachs, but these concerns were eased by a wholly positive start to Q2 earning reports, with Citigroup and IBM among others posting better earnings than expected.

Euro

The euro was allowed a bit of a respite following the releases of the ZEW investor sentiment survey, which saw an improvement in both components. This represented the first improvement in investor sentiment since September last year, and has been largely bred from rising exports, an especially important fact for Germany's primarily export market.

Japanese yen

Kiyohiko Nishimura, deputy governor of the Bank of Japan, announced that there are positive signs that Japan will escape deflationary pressures. However, positive improvements in consumer prices alone could not look to raise inflation, and may not appease calls for further action by the leading party to curtail any risk of deflation.