Sterling hovered near a 7-year high against a trade-weighted basket of currencies on Friday, buoyed by robust data that bolstered a view that the British economy was outperforming its peers. Britain’s public sector budget deficit narrowed more than anticipated in April, data on Friday showed. Public sector net borrowing, excluding state-controlled banks, totalled 6.8 billion pounds last month, down nearly 27 percent from a year earlier and the lowest shortfall for that month since 2008. Economists taking part in a Reuters poll had forecast a shortfall of 8.1 billion pounds. Sterling bulls emerged on Thursday after data showed British retail sales rose more strongly than anticipated in April. The currency had taken a knock earlier this week after UK inflation fell below zero in April for the first time in 55 years. Bank of England Deputy Governor Minouche Shafik said on Friday she saw “encouraging” signs from wage and labour market data, and that the causes of Britain’s plunging inflation rate were not expected to last long. And, Governor Mark Carney reiterated in a speech that interest rates increases, when they happen, would be gradual.
The euro slid to one-month lows against the stronger dollar yesterday, after U.S. data showing that consumer prices rose for a third straight month in April, as concerns over Greece continued to weigh on the single currency. The euro remained under heavy selling pressure as the prospect of a Greek default continued to weigh on markets. On Sunday, Greece’s Interior Minister Nikos Voutsis warned that the country would be unable to make a €305 million payment to the International Monetary Fund due on the 5th June, if a cash-for-reforms deal with its international lenders is not reached by then. The euro was also at three-week lows against the yen, with EUR/JPY down 0.33% to 133.40.
The dollar remained broadly higher against a basket of other major currencies yesterday , as U.S. data showing that consumer prices rose for a third straight month in April and comments by Federal Reserve Chair Janet Yellen continued to support. The dollar strengthened broadly on Friday after data showed that U.S. core consumer prices rose 0.3% in April and were 1.8% higher on a year-over-year basis, the largest increase since October. The greenback received an additional boost after Fed Chair Janet Yellen reiterated that the bank still expected to start raising interest rates later this year if the economy continued to improve as expected. The U.S. Dollar Index , which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.27% to 96.51. The dollar was also little changed against the yen and the Swiss franc, with USD/JPY at 121.50 and USD/CHF at 0.9439.