Daily currency report
The British pound rose after the new government released its first growth and public borrowing forecasts. The euro gained as well when industrial production in the 16 eurozone countries surprised to the upside showing growth of 0.8 per cent. The single currency was also boosted by an improvement on risk appetite which saw equity markets across the globe rise to the benefit of higher risk currencies such as the euro and pound. With the rally in equity markets taking full hold, the US dollar felt the brunt as safe haven positions were unwound.
Sterling rallied after the government's new Budget watchdog said the UK's borrowing would be lower than previously expected. The Office for Budget Responsibility forecast borrowing of £155 billion this year, £8 billion less than the number predicted by Labour. This surprisingly upbeat forecast comes ahead of next week's budget and has given the pound reason to rise against both the US dollar and the euro.
Improved confidence in a global economic recovery is triggering a rally in the equity market and an appetite towards riskier currencies. The dollar came under selling pressure as the world stocks headed for a fourth successive day of gains which prompted investors to take positions in higher risk currencies.
Major European markets all rose after a report showed that industrial production amongst the eurozone countries grew more than expected in April. The euro climbed back to levels not seen since June 4 as investors were encouraged by the 0.8 per cent monthly increase in output across the 16 nation bloc.
Traders have been focusing on the Bank of Japan's monetary policy meeting in which the Bank of Japan kept its policy rate unchanged at 0.1 per cent in a unanimous vote that was widely expected. Japan's central bank has announced plans to provide up to three trillion yen in low interest loans in an effort to spur economic growth.
Commercial Foreign Exchange Travelex Malta, freephone: 800 733 22, www.travelex.com/mt/