It was a fairly inconsequential day on the currency markets yesterday as traders received practically no new economic data to get their teeth stuck into. The only British release saw Rightmove’s house price index rise from 4.5% to 5.1%. Needless to say, but it traders were not rushing to their desks to readjust their Bank of England rate hike bets following the announcement.

There is little to look out for today either, although this morning’s UK public sector net borrowing figures could tip the Pound in the right direction if the report points towards a narrowing of the deficit in June.

The main event will take place on Wednesday morning when the BoE releases its latest minutes report. Any signs of an imminent tightening of monetary policy will likely bolster the Pound’s appeal but any cautionary remarks could lead to a rebound lower.

Euro

Sterling softened by around -40 pips against the Euro yesterday in reaction to the mildly encouraging news that Greece was able to pay its way out of arrears with the IMF after receiving a €7 billion bridging loan. Greece’s attempted return to normality was also helped by the reopening of the nation’s banks for the first time in three weeks. Though consumers were less happy when faced with a 10% VAT hike from 13% to 23%.

It seems that a little bit of profit taking was also at play, with markets looking to cash-in on the recent appreciation in Sterling against the single currency. GBP/EUR is currently trading just below the seven-year high struck on Friday but with the Greek debt deal not yet providing the Euro with the boost in confidence that many had anticipated there is potential for a recovery in the single currency.

US Dollar

The Pound to US Dollar exchange rate softened minimally yesterday as traders steered clear of large moves on a day devoid of significant market moving data.

A survey of financial analysts showed that the majority of market players still expect the Federal Reserve to begin its hiking cycle ahead of the Bank of England. The Fed is anticipated to start raising rates in December but investors believe the BoE will wait until the first quarter of next year. However, last week’s hawkish comments from BoE Chief Mark Carney mean that there is potential for UK rate hike bets to surge if economic data – CPI inflation in particular – improves at a faster pace than expected over the second half of the year.

Canadian Dollar

The Pound lost out on a little bit of ground to the Canadian Dollar yesterday as profit-taking stances reversed some of last week’s sensational six-cent Sterling gains.

The Pound is now trading close to its highest rate for six-and-a-half years and is over 20 cents stronger against the ‘Loonie’ than it was just three months ago. And with Canadian borrowing costs now equal to those in Britain, and with UK rates set to rise in around six months time, the UK currency could easily maintain and build upon its recent appreciations.

Australian Dollar

The Pound to Australian Dollar exchange rate struck a fresh six-year high yesterday. Analysts likened the recent collapse in demand for the commodity-sensitive Canadian Dollar to a six-month foresight into the potential path of the ‘Aussie’. It is feared that fiscal easing could bring about a recessionary climate, which could be exacerbated by the onset of weaker economic activity in Australia’s largest trade partner, China. This downbeat perspective suggests that the value of the ‘Aussie’ Dollar will deteriorate sharply in the second half of the year.