With a widely expected decision, the Bank of England left its monetary policy unchanged. The outcome saw some profit taking in long sterling positions, but the decline was capped as investors look forward to the PPI and CPI date. Safe haven currencies such as the US dollar, Swiss franc and Japanese yen could see gains going into the weekend with geopolitical tensions in Egypt on the rise.

Sterling

The Bank of England left its monetary policy unchanged and offered no statement with its announcement. Sterling saw a little weakening as some investors had priced in a small chance of a rate increase. Losses were contained, however, as investors look forward to inflation figures and the all-important Bank of England inflation report next week.

US Dollar

The US dollar moved higher after safe haven flows were supported by upbeat economic data in the US. The situation in Egypt remains extremely volatile and the transition of power does not appear to be going smoothly. The rise in geopolitical uncertainty is likely to help the US dollar, Swiss franc and Japanese yen, which are considered safe haven currencies.

Euro

A new record was hit on the yield of Portugal’s 10-year bond. This suggests that investors are continuing to sell Portuguese sovereign debt on the back of default fears. The European Central Bank was forced to intervene in order to slow the tide of selling. The renewed concern over the European Debt Crisis is likely to weigh on the single currency.

Japanese Yen

The Japanese yen saw very little activity in the overnight market. Japanese markets were closed because of a public holiday and will reopen on Monday. The yen could find some support on the back of news that China is continuing to fight inflation by raising rates. Also in Asia, Korea left interest rates on hold, which was a slight surprise to markets and came on the heels of less than hawkish comments from the Reserve Bank of Australia. Nervousness over central banks taking a softer stance on inflation could also help lift the yen on safe haven flows.