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Dollar continued where it left off on Friday in yesterday’s early trade as it gained ground on GBP and EUR. Market participants are still weighing up the pros and cons of Friday’s jobs data and measuring the potential risk benefit from a better than expected against the possibility of elevated inflation levels in the future. News that some analysts have started pricing in a Fed rate hike for the end of the year is not unexpected but certainly somewhat kneejerk.

A lack of tier 1 data left FX markets at the behest of other asset classes yesterday. GBP was helped off its lows (1.5810) by news that Lloyds TSB Group are due to pay back £2.3bn to the the treasury early. While this is merely a drop in the ocean as far as the total amount of cash loaned out by HM’s Government it does show a member of the banking sector that has confidence in its own capital and liquidity provisions; a rare commodity at the moment.

EUR weakened against GBP, USD and JPY as ratings alerts once again loomed for members of the single currency experiment. Ireland had its credit rating downgraded by S&P to AA from AA+ yesterday with rumours that other members of the EEA with high GDP to debt ratios could be next in the firing line. We would expect these to be the ‘PIGS’; Portugal, Italy, Greece and Spain. Another risk to the euro is the continued problems in eastern Europe; latvia failed to raise a single dollar in its previous auction and subsequently its main financial benefactors (Sweden and Austria)  took a hammering. Should an Austrian debt auction due today show any nerves then further euro weakness could occur.

GBP has started strongly this morning on the back of RICS house price data that showed  the fewest amount of estate agents and surveyors reporting declining prices in their area.