Daily currency report

The dollar continued to face selling pressure as markets continue to view the European Central Bank as the front runner for interest rate hikes. Protests in the Middle East and North Africa continue to unsettle markets and have pushed oil prices to near three year highs.

Sterling

Inflation in the UK stands well above the Central Bank’s two per cent target, but the Governor of the Central Bank continues to maintain that price developments are transitory in nature, although recently he has also admitted that commodity price rises need to be monitored carefully.

US dollar

The dollar continues to trade low against most major currency crosses. Currency markets continued to be driven by the outlook for interest rate differentials between the US, UK and eurozone. Employment figures showed improvements in the labour market, but the conditions were not so much improved as to change the interest rate outlook in the US. The rate of unemployment fell to two-year lows of 8.9 per cent, while non-farm payrolls reported 192k jobs were created.

Euro

The euro has been driven higher by the outlook for tighter monetary policy, but now that this outlook has been priced into the markets, it is difficult to see where fresh drive for the euro will come. The election for the new Irish government was won by the opposition on the platform that the new government would renegotiate loan terms. Any renegotiation will be seen as precedent setting.

Japanese yen

The Japanese yen continues to benefit from its safe haven status. Leading economic indicators showed a rise of 0.9 per cent. The coincident indicator, which measures the current state of the economy, was revised higher by the government for the first time since October of last year.

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