Daily currency report

Sterling remains near one-month highs against the euro as investors gear up for inflation data over the next two days which may go along way in shaping monetary policy in the UK. Oil prices are again on the rise as markets fear that tensions in Egypt could spread to the Middle East despite President Hosni Mubarak stepping down. Higher energy and commodity prices have already forced the Chinese Central Bank to raise interest rates this year and others could soon follow with the Bank of England expected to lead the way. The US dollar came under a little pressure after market players were left unimpressed by new budget plans. The euro suffered further as it becomes more apparent that the divide between European leaders on introducing new anti-crisis measures could risk sovereign debt contagion spreading to Portugal. The Japanese yen also fell even though the Bank of Japan, gave a more upbeat assessment on the Japanese economy.

Sterling

Sterling should continue to dominate currency markets over the next few days as investors gear up for critical inflation data which may indicate that UK interest rates are set to head higher sooner than expected. The pound is close to November highs against the Japanese yen and reached almost one-month highs against the under fire euro.

US dollar

Although focus in currency markets centred on events across Europe and Egypt, the US dollar did manage to falter as market players were left unimpressed by new budget plans which, according to many, did not go far enough to address the US’s dire fiscal position which may begin to weigh on the US dollar in coming months.

Euro

The euro opens under pressure after European Finance Ministers, who gathered in Brussels, failed to allay sovereign debt concerns within the area. Furthermore, fourth quarter growth figures, released from Germany and France failed to live up to expectations and consequently the single currency finds itself trading near three-week lows against the US dollar.

Japanese yen

The yen came under pressure from rival currencies despite more evidence that the country’s economy may be rebounding. The Bank of Japan did keep interest rates on hold at 0-0.1 per cent however gave a more upbeat assessment on the economy suggesting that it is slowly emerging from the recent slowdown.

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