Sterling slipped against the euro yesterday as investors became concerned ahead of key UK figures released later this week. The Bank of England minutes, inflation and unemployment figures are all expected to compound the view that interest rates are set to remain on hold for a considerable time. Current trends show that if the pound does strengthen against the euro, it is quickly sold off again, making it even harder to buy at the right time. Sterling did strengthen against the US dollar, as it tracked gains made by the euro against the US currency. Sterling had lost a considerable amount against the US dollar last week as a sell off in commodities saw a flight to the relative safety of the US dollar. Out today, we have inflation figures so call in now as this could cause significant volatility.

In the euro zone, the euro had a strong day. Despite concerns that the arrest of IMF chief Dominique Strauss-Kahn would impact on today’s meeting of European finance ministers, the euro rebounded as confidence grew that a solution would be reached regarding Greece to avoid a restructuring of the country’s debt. Greece is struggling to meet the term’s of last year’s €110bn package, but ministers are expected to show solidarity with the stricken country which should support the euro and potentially see sterling fall back towards €1.10 again. In terms of data, there is some economic sentiment data released which has caused movement in the past so call in now for a live exchange rate.

In the USA, the US dollar suffered across the board falling against the euro and dropping by 1% against the Swiss franc as investors battled to come to terms with the country’s fiscal position. In addition, optimism that European finance ministers would manage to negotiate a deal that avoids a debt restructuring saw a flow from US dollars to euros. Out today we have some housing figures which could cause some movement.

Elsewhere, commodity based currencies continue to suffer following last week’s sudden drop in commodity prices. Commodity prices have been particularly high and this has caused inflation across many countries. Many argue that commodity prices are a bubble waiting to burst, so that the global economy can get on with recovery without inflationary pressures. We shall have to see what happens.

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