The US dollar slipped on profit-taking and may remain lower ahead of key updates from Ben Bernanke and the Federal Reserve’s latest meeting minutes. The greenback was knocked back on approach to three-year highs on a trade-weighted basis as investors consider the likelihood of Fed chairman Bernanke indicating that an end to bond purchases may be near. Weakness in the US currency is supporting sterling, with the British pound moving above recent six-week lows before UK inflation data and minutes from the Bank of England. Evidence of declining price pressures and a Central Bank more comfortable with the UK economy should encourage traders to buy sterling. The yen was surprisingly lifted by one Japanese official whose comments suggested that the currency’s weakness may have reached its limit. Despite the yen’s more positive tone, the unit may find itself under pressure following the Bank of Japan’s latest monetary policy announcement.
Sterling
The pound climbed by as much as one per cent against the US dollar, moving clear of Friday’s six-week low supported by strong UK house price data and comments from Bank of England Governor Mervyn King, who said there were signs of a modest economic recovery in Britain. The sterling may recover further ground with UK consumer price inflation data expected to show weakening price pressures although any appreciation in the sterling is likely to be limited ahead of the minutes from the BoE’s May monetary policy meeting.
US dollar
The US dollar was pegged back by profit-taking and may struggle to advance ahead of the speech from Bernanke and the release of minutes from the Federal Reserve’s latest monetary policy meeting. The greenback fell some 0.7 per cent on a trade-weighted basis, having risen close to three-year highs last week amid signs the US economy is gathering steam and the Fed will soon look to reduce its monetary stimulus.
Euro
The euro was given a technical lift, benefiting from inflows after some investors chose to sell the US dollar given its jump to near three-year highs last week and before the Federal Reserve chairman delivers his latest assessment of the US economy. However, the single currency remains vulnerable as markets continue to weigh the chances of seeing the European Central Bank add to monetary stimulus after slashing its key interest rate earlier this month to spur economic activity in the region.