Sterling hit a one month high against the US dollar yesterday, helped by improved investor sentiment towards riskier assets. However, the rally ran out of steam as sterling broke through $1.58/£1 and investors took profits. Sterling strengthened despite minutes from the recent Bank of England meeting that showed real concern about the economic environment internationally – in particular the euro zone. In the medium term, sterling is likely to suffer as growth stagnates around the world. Out later today we have retail sales data that is expected to show no growth on last month as the impact of increasing energy bills bites. Call in now for a live exchange rate.

In the euro zone, the euro strengthened across the board on renewed hope that Sunday’s European summit will deliver a decisive solution to solve th region’s debt crisis. Optimism over the potential plan saw a euro rally that has continued despite the downgrade of Spain’s credit rating by rating agency Moody’s and attempts by the German finance minister to play down the optimism over Sunday’s meeting. Out today there is consumer confidence figures so call in now for a live exchange rate.

In the USA, data released yesterday showed that consumer prices increased by 0.3% but the ‘core’ (i.e. inflation that excludes volatile energy) price inflation only increased by 0.1%. The slower growth was to all extent ignored by the markets as investors focus on Europe. Out later today, we have unemployment claims figures, existing home sales figures and manufacturing figures so call in now to ensure you don’t lose out.

Elsewhere, a group of US governors visiting China skirted round the issue of bi-lateral trade frictions and instead focussed on pitching for investment that they hope will boost the fragile recovery back in the USA. The US senate approved a bill last week to put pressure on China to increase the value of the yuan that the USA feels gives it an international price advantage by between 15-40%. Call in now to speak to a trader.

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