However, with all the majors seeing some poor recent reported data, the temporary effects of inflation on Sterling have been mitigated.
In the US, the raft of data that emerged yesterday pointed generally towards the overall consensus – or foregone conclusion now – that the US economy is in slowdown; higher-than-expected PPI stats, although sometimes translated as signs of a healthy economy, in this case serve more to highlight the growing weakness of the greenback. The brief surge in the US Dollar seems to be over.
On the continent, the Euro's fate was dictated yesterday by the ZEW survey on investor confidence, which saw a dramatic 12-point plunge from last month to reach its lowest point for 15 years. This was mirrored almost point-for-point by Germany's own country-specific ZEW survey, which dropped by 11 points. With Germany's major standing within the Euro Zone, this hassled to a weakening on the Euro.
Here in the UK, Mervyn King has now sent off his second letter to Alistair Darling, and could look set to be sending one out every month until at least the year. Needless to say, the main culprits are food and fuel prices; food prices alone have gone up almost 9% over the year gone by. Inflation led to high CPI stats yesterday.
Looking ahead, we have a relatively quiet day on the data front. In the US, the Dollar will be at the mercy of its rivals today, with little market-moving data expected out. Fed board member Janet Yellen will be talking later today at 3.45pm, which could bring some fluctuation to the greenback.
In Europe, the main statistics due out are on Euro Zone construction output, which has been experiencing recent decline. If statistics show this trend to be continuing, we could expect the Euro to weaken off slightly throughout the course of the day.
Here in the UK, the minutes for the recent BoE meeting are due for release soon. Analysts might be examining minutes even closer than they normally do, given the ongoing debate on stagflation. With continuing speculation on the next rate decision, investors could look at the existing stance of the board members to make a prediction for the future.