The euro traded higher against all major currency crosses after the head of the European Central Bank said that an increase in interest rates was “possible” at the April policy meeting. Overshadowing the statistics is the ongoing geopolitical turmoil in the Middle East and North Africa. The downside for safe haven currencies such as the Japanese yen and Swiss franc should be somewhat limited.

Sterling

Sterling has weakened against the euro and the US dollar. CIPS PMI service sector survey data showed that growth in the service sector, which makes up three quarters of the UK economy, had moderated from the prior month’s levels. The downside for sterling is likely to remain limited. The Bank of England is widely expected to leave its monetary policy unchanged.

US dollar

The dollar touched fresh four month lows against the euro after Jean-Claude Trichet stunned markets with comments that suggested a rate increase in April was “possible”. Against sterling and the Swiss franc, the dollar managed to take back some losses on the back of improved economic data.

Euro

The euro exploded higher after the head of the European Central Bank, Mr Trichet no longer deemed monetary policy as “appropriate”. Mr Trichet went on to say that the council maintained “strong vigilance” against upside price pressures. Just to make sure that markets understood what this meant, he said that there was a “possibility” of an interest rate increase in April, but that he would not pre-commit at this time.

Japanese yen

Japan has been plagued with political uncertainty, which could come back to haunt the yen and undermine its status as a safe haven currency. The yen lost ground against the euro, falling to four month lows.

Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/