GBP

Sterling soared last week after Bank of England governor Mark Carney suggested UK interest rates could rise “sooner than markets currently expect”. This was taken as a cue by investors to buy sterling, which drove up to a 19-month high against the euro, as the single currency broke below the 80 pence barrier. The pound also recouped its losses against the dollar over the last month, to head back near May’s five-year peak. Against the Australian dollar the pound was up by a cent for the week after touching on a two-month low at one stage. This week, markets will be focused on Tuesday’s consumer price inflation figures and Thursday’s retail sales report. Most attention will be paid to the release of votes from the latest BoE policy meeting, as investors seek to gauge the bank’s readiness to hike rates.

EUR

The euro remains under pressure as a fall in bond yields following the European Central Bank’s loosening this month continues to suppress demand for the single currency. EUR/GBP slid to its lowest in over a year and a half, while the euro was steady at a four-month low against the dollar. Against the Swiss franc the euro was near a month low, while EUR/JPY was down one per cent at a four-month trough. Not a lot of data in the week ahead, but investors should note Monday’s inflation figures for the eurozone, and a German ten-year bond auction.

USD

The dollar had a mixed week after a bucket-load of data failed to offer much direction to the markets. It fell against the pound and yen, but posted more gains versus the embattled euro (which fell by a cent on the greenback). Disappointing consumer sentiment, retail sales and initial jobless claims all pointed to an underlying weakness in the US economy, while investors also turned their attention to events in Iraq. Action aplenty this week, with the FOMC statement and press conference the main event for the dollar. Investors will wait to see whether downbeat economic data (including the woeful Q1 GDP figures) alter the Fed’s outlook on tapering at all. The Philly Fed Manufacturing Index and unemployment data will also be worth watching.

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