Excluding the pull back seen in US weekly jobless claims figures, the string of data seen was below market forecasts. The soft US economic data combined with dovish comments from one Federal Reserve’s official enforced the view that the central bank would leave its policy accommodative for the foreseeable future. That contrasts with an expected interest rate increase by the European Central Bank, which is helping to support the euro and weigh on the US dollar. Sterling is trading alongside these developments, but sterling was also favourably impacted by two better than expected data releases. The euro is seeing gains not only on improved risk appetite, but also on the view that the European Central Bank will continue raising interest rates, in contrast to the outlook for US and UK monetary policy.

Sterling

ONS retail sales data jumped in the month of April and while the data was better than forecast and sparked an initial strengthening of sterling, momentum behind the move quickly wore out as investors saw the figures as positive skewed by the Easter day holiday and the Royal Wedding. Despite the strong figures, retailers continue to be downbeat on their outlook for demand.

US dollar

The US dollar appears to be back under pressure. Equity markets were able to eek out gains and the upbeat broader market sentiment has spilled over to Asia despite weak US economic data. All of the economic data released in the US, with the exception of weekly jobless claims, came in stunningly weaker than expected.

Euro

The euro opens higher against the US dollar but strong resistance to future gains is not far off current levels. As a result, euro gains could be limited, particularly with the lack of economic data which might have provided momentum. Investors also will hesitate to buy up too many euros prior to knowing the outcome of the IMF and EU commission’s visit to Greece to assess its government’s successfulness in meeting the terms and conditions of last year’s bailout package.

Japanese yen

The Bank of Japan decided with a unanimous vote to leave interest rates unchanged while the central bank left its grim output for growth unchanged. The Bank of Japan believes that the country will return to growth in the latter half of this fiscal year, but that there are extreme downside risks in the short term to output because of the damage caused by the March earthquake.

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

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