Sterling hit a seven-week high against the dollar yesterday, as some of the pessimism from uncertainty over next week’s UK parliamentary election waned with the focus on first quarter growth data due out the next day. Growth is forecast to have moderated in the first quarter, slowing to 0.5 percent from 0.6 percent, while for the year gross domestic product (GDP) growth is expected to have eased to 2.6 percent from 3 percent. Sterling made impressive gains last week, rising 1.5 percent against the dollar, lifted by a growing view within the nine-member monetary policy committee of the Bank of England that the next move by the central bank will be a rate hike. The BoE also flagged upside risks to inflation in its minutes released last week.
The euro hovered near a three-week peak this morning, having pushed higher overnight as the dollar came under broad pressure and on renewed hopes that cash-strapped Greece was a step closer to securing fresh funding. Greek Prime Minister Alexis Tsipras on Monday reshuffled his team handling talks with European and IMF lenders, a move widely seen as an effort to relegate embattled Finance Minister Yanis Varoufakis to a less active role in negotiations. Nevertheless, the situation still remained murky with Greek Prime Minister Tsipras also saying the government’s top priority as it faces depleting cash coffers was to pay wages and pensions, subsequently adding that defaulting on debt was not an option either.
The yen extended its gains against the dollar on Monday after a batch of weak US data fuelled more doubts about a mid-year interest rate hike. On Friday, a US government report on durable goods orders raised new questions about the Federal Reserve´s planned interest rate increase. While the headline number rose 4.0 percent in March that was driven by jumps in civilian and military aircraft as well as autos; without them orders fell 0.2 percent. The Fed´s policy committee meets Tuesday and Wednesday. The US central bank has said any increase in interest rates, which some expect as early as June, would be data-dependent.