Analysis / Daily / Finance / forex

Attention Turns to Eurozone CPI Data.

Sterling steadied on Friday after a rollercoaster week which has seen it scale seven-year highs against the euro even as doubts appear over how much more it can gain ahead of a potentially unsettling election in May. Helped by an afternoon recovery in Europe for the euro against the dollar, the pound bounced back from lows below $1.54 hit in early trade. It also inched up 0.12 percent to 72.54 pence per euro, its strongest since the end of 2007 but only 3 hundredths of a pence above Thursday’s high. Despite the gain on the day, the pound was almost a cent below 8-week highs hit against the dollar a day earlier, with a growing focus on political risks ahead of the election helping cool the past month’s stronger mood towards Britain.

Eurozone flash CPI data headlines the economic calendar in European trading hours. The headline year-on-year inflation rate is expected to remain in negative territory, showing a 0.5 percent drawdown in February following a 0.6 percent decline in the prior month. The outcome is unlikely to trigger a meaningful response the Euro considering its limited implications for near-term ECB policy outlook as the central bank prepares to launch QE this month. The EUR/GBP pair edged higher by 0.12% near fresh session highs of 0.7260 levels, rebounding from fresh seven year lows posted at 0.7240 levels. EUR/GBP defended mild gains as both the Euro and the pound lost ground versus the US dollar.

The dollar hit an 11-year high against a basket of major currencies on Monday, with the greenback gaining a broad lift after an interest rate cut in China dented the Chinese yuan and emerging Asian currencies. The dollar rose to as high as 95.505 against a basket of major currencies,  its highest level since September 2003. The dollar index last traded at 95.417. Some analysts said the greenback’s strength against the Chinese yuan and emerging Asian currencies in the wake of China’s rate cut helped bolster the dollar versus major currencies as well.

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