The US dollar fell sharply after data covering the main driver of the US economy, the consumer, turned negative. The figures added to the debate about US monetary policy, which should gather momentum with an economic calendar packed full of central bank speakers. Dovish policy indications will also be a worry for sterling ahead of Bank of England minutes. The pound’s recent recovery could unravel if the minutes show a voting shift towards additional quantitative easing. A slowing Chinese economy could motivate investors to trade more sensitively towards upcoming eurozone economic data and short the euro. ZEW sentiment index from Germany is forecast to drop sharply, stressing the need for the European Central Bank to do more to support the area’s economies using measures considered negative for the currency.

Sterling

The pound’s recent recovery will be put to the test with the Bank of England set to publish minutes from its earlier policy meeting, which may expand worries about its position on quantitative easing. Sterling was underpinned by solid data on British manufacturing, building a more hopeful first quarter growth picture for the UK economy, and lifting Cable to two-month highs. The currency was also buoyed by the Bank of Japan’s striking new stimulus plan that boosted demand for the yen’s more risky and yield-heavy rivals. However, the pound’s outlook looks a little more uncomfortable.

US dollar

The US dollar may find it difficult to move past speculation about Federal Reserve monetary policy ahead of another calendar full of central bank speakers who, in light of recent data, may take a more cautious approach when discussing a possible exit from monetary easing. The US dollar fell sharply, surrendering a sizeable portion of its recent gains against the yen after data on the US consumer raised fresh concerns about the strength of the economy and the Government’s stuttering fiscal programme.

Euro

Global growth concerns flared after China reported disappointing first quarter economic growth figures, a result that could motivate investors to trade more sensitively towards eurozone economic data and short the euro. Markets have in recent sessions appeared to overlook the difficulties facing the 17-member economy and its central bank, bidding the euro higher overall and to seven-week highs against the US dollar.

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