Daily currency report

The sterling had its biggest daily gain versus the dollar in a month after much stronger than expected UK retail sales data prompted a scaling back of interest rate cut expectations. Meanwhile, the dollar dipped to a two-week low against the euro before rebounding to finish only 0.5 per cent down on the day. Elsewhere, the European Central Bank is expected to ease rates this year as French inflation rose to its fastest annual pace in at least 11 years.

GBP

The sterling reversed fortunes against the dollar as British retail sales shot up in January at four times the rate predicted by analysts. As such, the news is likely to boost expectations that the Bank of England will wait before cutting interest rates again.

USD

The dollar fell victim to a slew of negative data released, cementing expectations that the Federal Reserve will continue cutting interest rates to support the faltering economy.

EUR

The euro continues to heap pressure on the dollar and the British pound as the futures markets are now pricing in only a 1in 4 chance of a rate cut from four per cent by June from a fully priced in cut last week. The turnaround in forecasts came after the French inflation figures release.

JPY

The yen held steady against most currencies with the exception of the euro and posted modest gains against the dollar in the wake of comments from the Bank of Japan Governor, Toshihiko Fukui who claimed that the Japanese economy was more resilient to external shocks than before, but the bank would take rising downside risks into account when setting monetary policy.