The week got off to a slow start with UK markets closed on Monday for a public holiday. Trade in currency markets heated up quickly as investors continued to digest comments at the end of the prior week from ECB’s Mario Draghi and the Federal Reserve chair Janet Yellen. The two policymakers appeared to put their central banks on diverging paths, which helped to lift the US dollar to 13-month highs against the euro. France lost its government for the second year in a row after the PM handed in a resignation when the economy minister refused to agree with austerity measures. Geopolitical concerns also mounted this week.

EUR

The economic data released in the eurozone continue to support the view that additional forms of monetary policy action, such as purchases of asset-backed securities might be needed to help keep European economies alive and to battle against an ever growing threat of deflation. As a result, markets began to feel a need to bring forward expectations of some sort of quantitative easing programme, which weighed on the euro. Sentiment across the eurozone continued to suffer as geopolitical tensions failed to ease despite a meeting in Belarus between Ukrainian and Russian leaders. German inflation figures were seen as a precursor to flash HICP figures which were expected to drop to 0.3 per cent year to year.

GBP

With markets closed on Monday, sterling found it easy to drift to five-month lows against the US dollar, particularly after BoE’s Broadbent suggested that raising interest rates should not be considered until wage growth was guaranteed. General euro weakness allowed sterling to jump back up to two-week highs against the single currency despite the relative lack of local data. A consumer demand survey showed that despite weak wage growth, consumer demand remained at six-month highs. The data supported the upside revisions to growth reported by the British Chamber of Commerce for this year. Growth in the UK is now expected to reach levels not seen since 2007.

USD

The most outstanding figure released this week was clearly the durable goods orders which showed a record increase of 22.6 per cent month to month. The data was positively skewed because of a large aircraft order and components that monitor business investment did not do as well. The headline release was enough when coupled with consumer confidence figures coming in at seven-year highs to support the dollar. The dollar rose on the back of strong economic data as investors continued to digest comments from Yellen, who seemed to recognise progress made in the jobs market and who was not as cautious sounding as she has been known to be in the past.