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Daily currency report

Overview

A black cloud formed across markets after bombings at the Boston marathon were linked to acts of terrorism. This followed a day in which a worrying picture was painted for the current health of the global economy after Chinese GDP data was revised down from 7.9 per cent to 7.7 per cent. The reaction, unsurprisingly, was risk aversion and triggered a bout of safe haven buying of the Japanese yen and US dollar. Data releases will also be paid close attention, with UK inflation figures for March and German economic sentiment data for April due for publication. The US will also be under the spotlight with housing starts, building permits and industrial production figures all expected to show that the world’s largest economy is recovering at a faster pace compared to its closest rivals.

Sterling

Ahead of a crucial few days for the pound, selling pressure continuedto hamper sterling’s progress as concern remains over inflation figures and Bank of England minutes. The wave of safe haven buying following a poor Chinese GDP figure and Boston bombings also left traders choosing other investments ahead of sterling. Attention will now turn to CPI inflation figures, which are expected to show a fall from 0.7 per cent in February to 0.4 per cent in March. Any reading under this prediction will only add more fuel to the quantitative easing fire, which seems to be growing on a monthly basis.

US dollar

The dollar will be hoping to gain more ground on the back of safe haven flows resulting from bombings in Boston. With gold prices having dropped by 12 per cent over the past two trading days, this may encourage even greater risk aversion flows into the greenback.

Euro

The single currency gained against sterling, with economists holding out for a positive outcome from the German ZEW economic sentiment index this despite forecasts expecting to see a fall from 48.5 to 42.0 for April. The head of the European Central Bank, Mario Draghi, was also cited as the main reason for the sudden crash in the price of gold after he announced that the European government may have to sell its gold reserves in order to facilitate the bail out of Cyprus. This caused the safe haven commodity to fall by 12 per cent in just 2 days, its worst performance since 1983.

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