Push Up Bra For Pound

The European currency showed mixed trading during late Monday and into the small hours on Tuesday in New York. Reversing the previous trends, the euro traded lower against the dollar and the yen shortly before midnight.

The common currency gained ground against these currencies after midnight but the Japanese inflation data came out at 1:00 am ET strengthened the yen against the euro.

The Japanese consumer confidence index, excluding one-person households fell to 46.8 in March from 48.4 in February. To the British currency, the euro moved sideways in a wide range in the late hours and continued the same into the small hours of Tuesday.

On the other hand, the single currency traded down against the Swiss franc during much of late trading on Monday but the pair started drifting higher after midnight.

The market is now waiting for the Swiss adjusted retail sales data for February followed by the British inflation figures for March. However, the ZEW economic sentiment for the German and euro-zone economies expected at 5:00 am ET will be of major attraction in the European session of the day.

The Euro is hovering under its all-time high at 1.3670, and there is a real possibility of reaching a new record: Futures positions are still well below December’s peak and will need rebuilding so a scramble at these historically extremely expensive levels is a very real possibility.

The dollar fell against the euro and rose against the yen as traders digested upbeat retail sales data. The Commerce Department said retail sales rose 0.7% in March, higher than a revised 0.5% rise the month before. Dollar traders will be keeping a close eye on upcoming economic data this week such as key inflation figures from the US and UK due Tuesday.

Thanks to another rally this morning the pound pushed to $1.9939 at one point - its highest level since September 1992. Currency experts say the magic number of both the financial and retail worlds - $2 - could be hit as soon as today. The pound has not been that strong against the dollar for 15 years.

Sterling came within a whisker of $2 yesterday as signs of higher UK inflation pushed the pound to its highest level since 'Black Wednesday' in September 1992. UK factory gate prices rose at their fastest pace for almost a year last month.

Today's annual CPI inflation rate is set to edge up to 2.8/9 per cent in March. This is still way above the Bank of England's 2 per cent target and will raise expectations that interest rates will rise again soon, possibly as early as next month.

Headline inflation is predicted to remain unchanged at 4.6 per cent. This figure is used as a benchmark by many wage negotiators. The relatively high level of all the key inflation measures makes it very likely that the Monetary Policy Committee (MPC) will endorse a 0.25 per cent base rate increase in May. After March, inflation is expected to head lower as the majority of the recently announced price cuts in utility bills take effect form April, although the Bank's MPC is likely to remain concerned about medium-term inflationary pressures.

The rand rallied more than 2 percent against the dollar yesterday, bolstered by strong metal prices and approval for what will be South Africa's biggest private equity buyout. The rand was bid at R7.0906 a dollar at 5pm, its strongest in seven weeks, according to Reuters data, and more than 11c better than Friday's bid price. Analysts said conditions were ideal for the rand, with commodity prices gaining, the euro strong, carry trades regaining lustre and capital continuing to flow into the country.

The rand is slightly at risk today with US inflation data due which could dampen sentiment if it came in higher-than-expected. A weaker dollar helped lift platinum to a fresh five-month peak, and gold to its best level in seven weeks. As the biggest producer of these precious metals, the local currency is often impacted by their prices.

Morning Market rates:
(Indication prices only, they are not offer rates)

GBP/USD: 1.9887
GBP/EUR: 1.4681
GBP/AUD: 2.3881
GBP/CHF: 2.4109
GBP/ZAR: 14.0899
USD/JPY: 119.02
USD/ZAR: 7.0750
EUR/USD: 1.3516
EUR/ZAR: 9.5771
GBP/NZD: 2.6865
GBP/AED: 7.3098
GBP/CYP: 0.8497
GBP/CAD: 2.2511
GBP/THB: 64.191