UK markets come back from an extended holiday weekend with sterling trading near six-month lows against the euro. Investors are looking forward to this week’s Bank of England and European Central Bank policy meetings and the diverging view of interest rates are helping to drive trade in the euro higher against most currencies. The dollar took back some losses after economic data was released above market forecasts. A manufacturing survey as well as construction spending figures showed growth continuing. In the eurozone, PPI data is expected to see fresh evidence of strong price pressures, which will likely allow ECB’s president the possibility to maintain his hawkish stance on inflation.

Sterling

Sterling opens near six-month lows against the euro and has given up some of the strength against the US dollar. The release of CIPS PMI manufacturing survey could potentially weaken the pound further if expansion in the sector is seen weakening, as forecast. On the other hand an upside surprise in the manufacturing survey for April could suggest that the recovery is continuing and possibly strong enough to withstand a rate increase, which would give sterling a much needed lift against the euro.

US dollar

The news that Osama bin Laden has been put to rest by US commandos has worked its way through the markets and is not expected to have further impact, unless new developments arise stemming from his death. In the meantime, the dollar has taken back some of the losses seen. Initially, the dollar strengthened on the news, but then later began to weaken as investors took a “risk on” approach to trade.

Euro

The euro is holding onto stronger levels against most currencies as investors look forward to this week’s ECB MPC meeting. PMI manufacturing figures were revised higher and support the view that the central bank will have to continue taking a hawkish stance on policy. Economic data expected is forecast to further support that view with PPI seen rising by 0.6 per cent on the month.

Japanese yen

The Japanese yen experienced a thin trading session. Equity markets slipped in Asia and prompted investors to bring home investments, which resulted in a stronger yen.

Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/

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