US Fed minutes due today

Today's Highlights

Sterling recovers in spite of deflation

BOE minutes to be scrutinised for rate hike hints

US Fed minutes due today

FX Market Overview

Can I apologise if you have not received the Daily Currency Insight over the last couple of days. It would appear we have some gremlins in the server that manages the emails; hence the erratic nature of the delivery.

The European Central Bank is reportedly considering taking further Greek collateral to facilitate further loans and it is becoming clearer that Greece is not going to be able to make the next payment to the International Monetary Fund without further help. Meanwhile the European Central Bank is stepping up its bond buying program to try to introduce some liquidity into the financial markets ahead of what many are fearing will be an equities market correction through the summer. Unsurprisingly the euro weakened after that news. In fact it is at significant crossroads against both the Pound and the US Dollar. Above €1.41 against the Pound or below $1.10 would signal more intense euro weakness. So please be careful.

Sterling had a day of consolidating its position against some currencies but gaining against others. The 0.1% UK deflation figure was not as awful as some had forecast and, whether prices are up or down 0.1% is largely academic in the overall scheme of things. Hence, traders were happy to be involved with the Pound in later trade. This morning brings the minutes from the last Monetary Policy Committee meeting. As the MPC left the base rate and QE programs alone at that meeting, the only interesting factor that could emerge from these minutes would be the timing of the first interest rate hike. That is probably a year away though, so the minutes are unlikely to move the Pound.

This afternoon brings the minutes from the last Federal Reserve meeting and the same rule applies. What they said about the immediate future is less interesting than any comment on the date of the first rate hike. Friday will bring the US inflation data and a further decline into deflation is forecast. The Dollar, which has been robust of late, has plenty of room to decline if the number is worse than -0.3%.

Friday afternoon will also bring the Canadian inflation data, which is at least likely to be in positive territory. The Canadian Dollar has been weakening over the past 6 weeks so be ready for CAD strength if the inflation rate is anywhere above 1.1%.

Tomorrow brings the South African Reserve Bank interest rate decision. No change is likely at this meeting although the historically weak Rand could do with some support. However, everyone will be watching for hints on the first interest rate hike from the SARB. That is not likely before November so the Rand could well weaken more substantially in the months ahead. It is at a crossroads against the Pound right now. Anything above R19.00 would herald significant Rand weakness.

And we have in the past seen the stewards at Ascot ensuring hem lines aren't too high but there are rumours that staff at a film premier in Cannes turned women away for not wearing heels. There's nothing shallow about the film industry is there.