Sterling came under pressure yesterday as the forces that have seen the dollar weaken so seismically in the past month eased off.

A potential downgrade by Moody’s, the ratings agency, saw yields on US Treasury debt rise last week as investors wanted more reward for the risk. The affirmation that the outlook for the US will kept at ’stable’, the UK is of course viewed as ‘negative’, allowed dollar to strengthen further.

Data yesterday was also good to the dollar as existing US home sales rose by 2.9% to an annual rate of 4.68m as first-time buyers swooped on cheaper properties although the high end of the market was still seen to be sluggish. If you’ve got the money it’s a good place to be a first time buyer; more than 340,000 properties had notices served against them for either auction or default, the highest since records began in 2005.

GFK consumer confidence for the UK was released overnight and the steady growth that we have seen in this measure over the past 3 months has unfortunately been suppressed. Consumer Confidence was unchanged at -27, worse than the analyst’s expectations of a move to -25 as a mixture of gloomy headlines after the Budget and falling mortgage rates saw respondents in a mixed mood. So far it has had no real effect on currencies.

ZAR has strengthened massively in the past day after some supremely bullish comments from the SARB Governor Tito Mboweni. The South African MPC cut rates by a full 100bps yesterday as expected however it was Mboweni’s assertions that the MPC was ‘ not in the mood for any further significant reductions’. Interest rates are sitting now at 7.50%; given their inflation picture we would think that any cut below 6% would be a mistake. However, more importantly some would say, this will do nothing to protect them against the might of the British & Irish Lions who kick off their tour tomorrow.

Inflation may be high in South Africa but in the Eurozone it is falling quickly; ‘flash’ HICP is due at 10.00 BST and euro participants may benefit from any increased interest rate cut price in for next Thursday should the figure disappoint. US GDP is also due at 13.30 with a provisional figure of -2.5% for Q1 expected.

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