The Pound put in a jaded performance yesterday. There were ups, there were downs. But generally speaking Sterling traded with a neutral bias ahead of this morning’s UK CPI report. Markets anticipate another month of stagnant yearly price pressures – not particularly exciting – but spirits could be roused somewhat if the inflation index prints above zero. On the other side of the coin, the journey could prove even worse for the Pound exchange rate if the CPI report shows that Britain has already slipped into disinflation.

Sterling could soften if CPI comes in lower-than-expected but markets are prepared for such an outcome – Bank of England Governor Mark Carney has been predicting it for quite some time – and therefore the impact shouldn’t be too strong.

Euro

The Greek stock market was thrown into a little bit of a frenzy yesterday afternoon as media reports, which were ‘not confirmed by the European Commission’, indicated that EC President Jean-Claude Juncker had proposed a deal to break the impasse between Greece and its creditors. Greek stocks rallied 30 points on the rumour, which could see the EC relax austerity measures in the Hellenic nation and release around €5 billion of bailout funds. However, there is a long way to go before this potential bill is A) confirmed by the EC and Greece, B) accepted by the ruling left-wing Syriza party, and C) allowed by German voters who may consider it unsustainable.

The Pound rallied by around half a cent against the single currency on the news despite the fact that it could help preserve Greece’s membership in the Euro area.

US Dollar

The Pound lost out on around a third of a cent against the US Dollar yesterday as markets softened their Sterling positions ahead of this morning’s British inflation data. This afternoon an American report is anticipated to show that housing starts ramped up from 2.0% to 9.9% in April, which could prevent ‘Cable’ registering further gains unless the UK CPI report prints higher-than-anticipated.

But there is potential for GBP/USD to strengthen again later on in the week when the latest US inflation report is released because it is tipped to show that price pressures dropped to -0.2% in April.

Canadian Dollar

The Pound managed to rally by around 130 pips against the Canadian Dollar yesterday to reach its highest level since the beginning of March. The motivation behind the move was enhanced speculation that the relative strength of the Canadian Dollar versus the US Dollar could prompt the Bank of Canada to intervene in the currency market with another interest rate reduction. The BOC has repeatedly refuted such claims but the market chatter persists nonetheless.

Australian Dollar

It was a choppy but ultimately fruitless day of trading for GBP/AUD yesterday as markets in Europe awaited this morning’s key UK consumer price index report and traders in Australia held out for this morning’s policy statement from the Reserve Bank of Australia.

New Zealand Dollar

Sterling rallied by around a cent against the New Zealand Dollar yesterday thanks to rumours that moves by the government to help tighten lending conditions in Auckland could pave the way for the Reserve Bank of New Zealand to slash interest rates.