After drifting early in the day, the euro edged higher versus the dollar late yesterday after the ECB said that it will continue to provide ample liquidity to Irish banks. Upside versus the USD, however, was limited with talk of higher interest rates in the US by the end of the year (the Fed’s Kocherlakota said that higher short-term rates, perhaps a rise of 75 basis points, were “certainly possible” in late 2011) providing a bit of a lift for the dollar.

The US will be the focus of attention today with the non-farm payrolls report for March due for release. A good number could provide some support for the USD going into the weekend. Meanwhile, the euro hit a 10-month high above Y118 versus the Japanese yen overnight and is now up more than 11% from lows of Y106.50 seen just a couple of weeks ago. The yen looks set to remain under pressure on expectations of a prolonged period of easy monetary policy from the Bank of Japan while the ECB gets ready to raise interest rates.

The dollar also saw gains versus the Japanese currency on hawkish comments from Fed officials. The Tankan survey released overnight showed, as expected, an improvement in sentiment amongst large Japanese manufacturers in Q1 but the headline index is expected to fall back again in June given the report does not fully reflect the earthquake impacts.

Despite some modest gains overnight, sterling continues to trade around five month lows versus the euro, with the GBP weighed down by speculation that the ECB will be ahead of the Bank of England in terms of policy tightening. A poll released earlier in the week shows that analysts now expect the BoE to hold off until Q3 before taking any action given the huge uncertainties surrounding the outlook for the economy.

Today the market opens down against the majors once again, Sterling continues to follow a bearish trend pattern against virtually all of its counterparts and provides an excellent opportunity for sellers. For any buyers it is more of a time of concern as we currently test major ‘support’ levels against both the AUD / EUR / USD and CAD. If you have a requirement to buy or sell and would like to discuss your requirement further do not hesitate to give me a call on my direct line.

Tom Trevorrow

Senior Trader

Tel: +0044 1736 335264

Email: tom.trevorrow@torfx.com