powered its way to 19-month highs versus the euro and reached similar peaks against a currency basket after Bank of England minutes struck an unexpectedly hawkish tone. The pound also rallied against the US dollar hitting two-week highs, supported by a fall in the ’s unemployment rate that took markets by surprise. Instability in eurozone debt markets could damage broader sentiment that has already turned cautious after some indifferent US corporate earning reports. As a result, the pound will be at risk of profit-taking as will most currency units that are closely correlated to the euro area.

The pound surged to fresh 19-month peaks against the euro after minutes from the Bank of England’s latest policy meeting seemingly closed the door on additional quantitative easing. Policy makers said inflation may prove to be more stubborn than expected after voting unanimously to hold rates at 0.5 per cent at the bank’s April meeting.

US dollar

The US dollar is expected to see some volatility as global traders gear up for another batch of US economic data that will add to the debate on whether the economy is set to slow over the coming months. Recent unemployment data has slipped, leaving some economists to revive talk of more Federal Reserve asset purchases.

Euro

Investors are becoming increasingly nervous ahead of the critical auction of long-term bonds in Spain with markets concerned that a spike in borrowing costs for Madrid could destabilise eurozone debt markets once more. The euro and European stocks are already under pressure after a warning from the International Monetary Fund that the region’s banks, particularly in , are facing a very uncertain outlook.

Japanese yen

The yen extended its decline falling close to a two-week low versus its British rival after Japanese data showed the country’s international trade balance slipped back into negative terrain. Japan’s account of exports against imports fell to -82.6 billion yen in March from the previous month’s +32.9 billion yen despite a pick up in exports.