The British pound was the standout performer among the major currencies with robust UK economic data fanning hawkish optimism about Bank of England monetary policy. The euro should face more of an examination in the days ahead with key eurozone PMI surveys this week expected to give investors clues about how likely it is that the region will be able to sustain an economic recovery while upcoming minutes from the Federal Reserve could give currencies an aggressive shake-up if investors are given any new signals about the Fed’s stimulus taper story.

Sterling

There could be further upside potential for the British pound over the coming days if UK data on government borrowing and industrial activity add to hopes about Britain’s strengthening economic recovery. However, with sterling flying high, below-par numbers this week could spark some profit taking on the currency’s recent gains ahead of revised UK second quarter GDP figures and a long UK bank-holiday weekend.

US dollar

Friday’s US housing and consumer confidence data made little impact on US dollar sentiment ahead of this week’s Federal Reserve minutes as markets continue to speculate about when chairman Ben Bernanke will start to taper the Fed’s monthly bond purchases. Minutes from the Fed’s earlier policy meeting are expected to bolster those taper views. Investors will be keen to learn how many of the rate-setting committee feel US economic and employment growth is now strong enough to warrant a reduction in monetary stimulus. The US dollar could rally broadly if markets, subsequent to the minutes, feel that a cut in stimulus could be as imminent as next month’s policy meeting.

Japanese yen

The yen gained after Japan’s latest export numbers showed an increase in overseas sales, although trade data did uncover a widening of Japan’s trade deficit despite the Bank of Japan’s efforts to target a weaker currency.

Euro

Eurozone economic data will lead the global calendar in the days ahead with the euro very likely to come under the spotlight as markets consider whether the region can sustain its second quarter recovery. Investors are also beginning to focus more attention on German elections and the overall political outlook for the euro area. The single currency will be vulnerable to selling should Thursday’s important PMI surveys miss market forecasts and suggest the European Central Bank will continue to consider lower interest rates in order to support fragile economic growth.