The euro rallied against the British pound, climbing almost 0.6 per cent at one stage after the latest eurozone PMI data beat market expectations, hinting at stronger growth over the second quarter. However, European Central Bank President Mario Draghi may make a fresh attempt to talk down the euro in his next speak. The New Zealand dollar surged after the Reserve Bank of New Zealand raised interest rates for the second consecutive month and hinted that more monetary tightening is on the horizon. In contrast, sterling slumped after minutes from the Bank of England revealed no signals about earlier rate hikes while a survey on British industry unexpectedly declined. Another weak US housing report sent the US dollar lower as the US currency remains near FOUR-year lows against the British pound. Economists expect Japanese inflation data to show another increase which could bolster demand for the yen which is trading near one-week highs against sterling.
Sterling
Investors took profit on the pound’s gains through April after minutes from the Bank of England revealed no signals about earlier rate hikes while a survey on British industry later in the day unexpectedly declined. Sterling hit fresh four-year highs against the US dollar last week after robust UK employment data signaled to markets that the BOE will soon start debating a rate hike. While minutes released showed no serious concerns about sterling appreciation, the minutes from the BOE’s April meeting were not as hawkish as some in the market had positioned for.
US dollar
The US currency opens near one-week lows against a basket of currencies but traders may find the greenback more appealing if the speech from ECB President Mario Draghi hits the euro. The US dollar fell after data on US new home sales in March showed the weakest pace of sales in eight months. Weak US reports covering durable goods orders and jobless claims could dampen recent optimism about stronger US economic growth over the second quarter which would be dollar-negative. The US currency remains near four-year lows against the British pound.
Euro
The euro rallied against the pound, as it retreated from earlier one-and-a-half-month lows against its UK rival, boosted by business surveys which pointed to stronger economic growth in the 18-member economy. Both the flash manufacturing and service sector PMI surveys for April beat market expectations, highlighting the growing attraction of euro zone assets for global investors which has been a key support for the euro in 2014. However, the data also uncovered the increasing risk of much lower inflation, a problem the ECB says it would fight with more aggressive monetary easing.