Sterling climbed against the euro and US dollar on Friday as higher than expected producer price inflation left many speculating that the Bank of England could raise interest rates sooner than expected. In addition, the initial $11bn float of a commodity trader in London also saw high demand for sterling. In terms of data this week, the markets will be eyeing the Bank of England’s quarterly inflation report – due out on Wednesday. This will give clues as to how policymakers expect to balance above-target inflation with stuttering UK economic growth. Poor data last week added to a poor picture of UK economic recovery, leaving many not expecting a rate hike until late 2011 at the earliest. Call in now for a live exchange rate.

In the euro zone, the big news on Friday came just at the close of business in the UK. A report (later denied by the Greek government) in a German newspaper suggested that the Greek government had been in secret negotiations about a possible euro zone exit. This (unsurprisingly) saw the euro plunge against its major counterparts, posting the biggest weekly loss against the US dollar since January. So far today, the currency is a little more stable as Germany’s trade balance posted an even higher surplus. Out later this week, there is a wide variety of industrial data finishing with GDP figures on Friday that could see some volatility so call in now for a live exchange rate.

In the USA, the US dollar got a boost on Friday after non-farm payroll figures showed that employers added 244,000 last month – far higher than what economists had expected. This helped risk appetite globally, and was one of the reasons why sterling strengthened on Friday. Out later this week, there is trade balance, inflation and retail sales data so call in now for a live exchange rate.

Elsewhere, the strong US employment figures, combined with strong Canadian employment figures boosted risk appetite and undermined strength for the Canadian and Australian dollars – despite a recent drop in commodity prices.

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