In contrast, US consumer confidence data may bolster views that the Federal Reserve could taper its own stimulus programme in the coming months which may reflate demand for the US dollar. The greenback came close to three-year highs after Federal Reserve chairman Ben Bernanke gave markets hints about less accommodative US monetary policy. Monetary policy should remain the focus for the sterling in front of the much-anticipated arrival of new Bank of England Governor Mark Carney in July. Dovish expectations have continued to weigh on the pound recently and BoE deputy Governor, Paul Tucker, should add to the debate with his comments. However, the euro and the European Central Bank’s next policy move may attract a larger share of investors’ attention. Euro area officials will meet to discuss jobs for the youth ahead of data later on consumer prices and unemployment in the eurozone. Low inflation and another record number of individuals without jobs could be a difficult image for the euro to carry into ECB policy meeting.

Sterling

Bank of England deputy Governor Paul Tucker will be speaking and his comments may give the sterling direction in North American session ahead of a fairly quiet week in terms of key UK economic data. The pound opens a holiday-shortened week near the bottom of its recent ranges amid concerns the BoE will explore new ways of stimulating a stuttering economic recovery under Carney, who will take over as Governor in July. Markets are expecting a strong US consumer confidence report later which may place sterling under further pressure from the US dollar.

US dollar

The US dollar rose close to a three-year high against a basket of currencies after Bernanke said the Federal Reserve could possibly reduce its bond-buying programme in the next few meetings if economic conditions continued to improve.

Euro

Dovish remarks from one European Central Bank speaker undermined the euro although the single currency is maintaining a comfortable above recent five-week lows against the US dollar in front of important updates from the euro area. Leaders will meet to discuss deep-rooted high youth unemployment in the region’s peripheral economies before data on the latest consumer price inflation and official unemployment.

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