The pound enjoyed a strong finish at the end of last week as sterling’s gains came on the back of hawkish comments from MPC member Charles Richard Bean. The dollar gave up some of last week’s late Friday gains. The gains were a result of a strong drop in the rate of unemployment. The euro suffered losses from last Thursday onward as Jean-Claude Trichet spilt cold water on the idea that the European Central Bank would hike interest rates anytime soon.

Sterling

Sterling is likely to benefit in front of this week’s Bank of England MPC meeting. Hawkish comments from MPC member Bean on top of the robust PMI surveys helped to support sterling at the end of last week. Markets have started to price in a chance of a rate increase of 25-basis points by as early as May.

US dollar

The dollar has given back some of its gains made at the end of last week. Safe haven flows into the dollar picked up going into the weekend with the situation in Egypt still tense. The release of employment data in the US did not hurt the move that was underway on Friday. While non-farm payrolls came in at a disappointing 36,000, investors shrugged off the data and focused on the sharp drop in the rate of unemployment.

Euro

Any euro gains seen are likely to be capped as Trichet’s less than hawkish comments made at last Thursday’s press conference continue to ring in the ears of traders. Not only has Mr Trichet spilt cold water on the euro’s rally, but comments made from government officials attending the EU summit meeting last week would suggest that politicians are not exactly in agreement. This will only continue to feed into concerns that the EU will not be able to come up with the “comprehensive package” that markets are expecting at the end of March to resolve its debt crisis once and for all.

Japanese yen

The yen saw little reaction to news that the MoF increased loans to the IMF in order to help Ireland. The government bought about 20 per cent of the ESFS bonds that were auctioned off last month in Europe. The Japanese government is anxious to support the EU as it fears a sovereign debt crisis in Europe could come back to haunt its own export market.

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

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