Forex - Pound holds above 2 dollars, euro shrugs off complaints of strength

LONDON (Thomson Financial) - The pound maintained its footing above the 2 usd level after a week of strong UK data ended with a somewhat mixed retail sales figures.The pound briefly fell below the 2 usd threshold as monthly sales growth in March came in slightly under expectations, but closer analysis of the figures showed that firms are confidently pushing price rises through to consumers. Expectations of a hike in interest rates in May to 5.50 pct therefore remain intact, and further rises are also a subject of speculation."The debate for the May Monetary Policy Committee meeting is likely to be between a 25 basis point hike or a 50 point hike. At this stage, we expect a 25 basis point hike in May, unless signs emerge of a further rise in inflation expectations, with another soon after," said Michael Saunders.Against this backdrop the pound is predicted to stay above the 2 dollar level.Investor attention will next turn to mortgage lending and money supply figures on Monday. Later, on Tuesday, the Bank of England's Monetary Policy Committee will come before the Treasury committee, with the market scanning their comments for clues as to how high interest rates will go.Elsewhere, the euro remained steady against the major currencies, off earlier highs in narrowly ranged trade, with markets watching comments from a meeting of euro zone finance ministers and central bankers to assess levels of concern over the euro's strength.The buoyant euro -- which is within striking distance of its all-time high against the dollar -- has led to worries it may impact euro zone economic growth.But few concerns have been expressed so far at the Ecofin meeting, with euro group president Jean-Claude Juncker saying he is not worried about the currency's appreciation, and Portuguese representative Vitor Constancio making a reference to tight vigilance, only to seemingly contradict the comment later."Euro/dollar has remained within a tight range as comments from the Portuguese ECB member Constancio confused the market," said analysts at BNP Paribas."Within an early statement he suggested that the ECB is watching the euro exchange rate closely ... later he made it clear that the ECB is not targeting the exchange rate and the economy is still strong."In any case, they said, "as long as the ECB needs to hike interest rates euro-bearish comments will only have a minor impact."It will take a concerted effort from central bankers to make any impact on the currency market.Today's only euro zone data -- French household consumption of manufactured goods -- was above expectations, showing a 0.7 pct rise in March, rebounding from a 0.5 pct fall in February.Analysts said the data bodes well for the euro zone growth outlook, although their immediate impact on the market was negligible.Meanwhile, the yen remained weak as carry trades recovered, despite news of a 0.9 pct rise in the Japanese all-industry index, beating forecasts for a 0.3 pct fall."It would be wrong to buy the yen using the stronger economic performance as a reason -- a better Japanese economy could even prompt the yen to move lower if a stronger economy takes risk appetite up," said analysts at BNP Paribas.Finally, the dollar also stayed on the back foot, near day lows against the euro, after yesterday's weak Philadelphia Fed's survey of manufacturing activity was unchanged in April from late March, confounding expectations of a rise.London 1550 GMT London 1246 GMT
US dollar
yen 118.83 up from 118.63
sfr 1.2080 up from 1.2063
Euro
usd 1.3600 down from 1.3610
stg 0.6787 down from 0.6792
yen 161.66 up from 161.46
sfr 1.6433 up from 1.6419
Sterling
usd 2.0044 up from 2.0034
yen 238.20 up from 237.67
sfr 2.4220 up from 2.4167
Australian dollar
usd 0.8360 up from 0.8334
stg 0.4129 down from 0.4168
yen 99.34 up from 99.16