Sterling loses ground against the euro but gains against the US dollar | Smart Daily Currency Note

Sterling

Sterling had a mixed day on Tuesday, posting its best monthly increase against the US dollar for two years but falling sharply against the euro in the afternoon. With a report from the Bank of England revealing that British banks had eased housing credit restrictions and granted more home loans through March than many had predicted, hopes of a sustained economic recovery kept their momentum. Nevertheless, figures also revealed consumer confidence saw a decline this month and as noted sterling performed less well against a buoyant euro. Today, the main announcement will be the first of the three Purchase Manager’s indices (PMI) released over the next three days data which will prove a particularly significant barometer as to the strength of Britain's recovery. Today’s manufacturing PMI figures will be watched closely. Expectations are for the index to be under 50, which is indicative of a contraction, but that they will be better than the previous months index. Call in for the latest insight to the market and a live price from your trader.

Euro

The euro's fortunes improved somewhat yesterday as it made gains against both sterling and the US dollar during the afternoon as expectation that the European Central Bank will take positive steps to stimulate demand in the region increased alongside the anticipated interest rate cut. It will be interesting to see if the ECB does cut interest rates as some market commentators believe they will hold back to a later date. If they don't this will boost support for the euro. German retail sales data came in slightly stronger than expected during the morning, whilst Monday's resolution to the political situation in Italy continues to bolster euro performance. With little data released across Europe today, euro strength will take its lead from news released elsewhere in addition to the on-going speculation surrounding what course of action the  ECB will take at Thursday’s meeting. Call in now for updates on developments today ahead of this and live rates.

US dollar

The US dollar dropped across the board around lunchtime yesterday as data revealed that business activity in the world's largest economy unexpectedly decreased for the first time in over three years – adding to expectations that the Federal Reserve will be forced to continue its quantitative easing programme for the time being. The Chicago Purchasing Manager's Index figures described a contraction through April topping off a month of poor economic news for the US and worries about the speed of its recovery. Manufacturing data and Crude Oil statistics will preclude an important statement from the Federal Open Market Committee this evening – be in touch to gauge anticipation in the markets throughout the day.

Worldwide

Yesterday was fairly quiet overall elsewhere. The Indian Rupee was a particularly strong performer, rising against the majority of its peers following the announcement of new government measures to ease inflation and steady the currency by attracting investment from overseas. The government of India intends to cut a levy on both corporate bonds and foreign investment which saw a 0.7% gain over sterling, and adds to an aura of confidence around the Indian economy this Spring. The Danish krone, Norwegian krone and Swedish krona all performed well in anticipation of a rate cut from the ECB, furthermore the Norwegian krone was buoyed as data revealed that the rate of unemployment was lower than expected, whilst Sweden's currency being the biggest mover in spite of Swedish growth figures performing only at around half of levels seen last year - capping off an overall good day for Scandinavian currencies. Be in touch with your dedicated trader for up-to-the-second developments and market reactions.