Sterling was held in tight ranges with no domestic developments.

The German IFO business confidence index strengthened to 93.6 for April from a revised 93.2 the previous month, but slightly below consensus forecasts. The current conditions component edged lower to 95.0 from 95.4, but this was more than offset by a recovery in the expectations index to 92.2 from 91.0 the previous month.

The IFO remained cautious over the outlook with the economy still lacking momentum despite an increase in export expectations.

In its latest monthly report, the Bundesbank stated that there had been a rebound in industrial production and that the economy is likely to have expanded in the first quarter of 2023 compared with previous expectations that there would be a small monthly contraction.

It added that there had been a further boost to activity due to a surge in industrial orders. The bank added that unemployment is likely to fall slightly over the next few months, but consumption will still be hampered by high inflation.

ECB council member Schnabel stated that a 50 basis-point rate hike was still on the table for the May meeting.

Consensus forecasts are for a 25 basis-point hike, but markets expect an overall hawkish stance over the next few months.

There were no major US developments and the dollar overall drifted lower with the currency index at a 1-week low, although it held firm against commodity currencies.

In testimony to parliament, Bank of Japan Governor Ueda stated that it was appropriate to maintain a loose monetary policy. Markets, however, were still wary over a potential adjustment to the yield curve control programme at this week’s policy meeting.

The latest quarterly Australian inflation data is due on Wednesday.

Consensus forecasts are for a quarterly increase of 1.3% from 1.9% previously with the year-on-year rate slowing to 6.6% from 6.8%.

The Riksbank will announce its latest policy decision on Wednesday. Consensus forecasts are for a further 50 basis-point rate hike to 3.50%.

Rhetoric on the exchange rate will be watched closely.

The dollar was unable to gain significant support on Monday. EUR/USD challenged resistance above the 1.1000 level. EUR/USD held above this level and posted highs at 1.1065 and close to 12-month highs before settling close to 1.1050.

US yields drifted lower which sapped support for the US currency. USD/JPY was unable to hold gains to 134.70 and dipped below 134.00 before settling little changed around 134.15 amid selling on rallies.

The Swiss franc held firm in global markets. EUR/CHF tested support below 0.9800, USD/CHF dipped below 0.8900 with lows at 0.8865, close to 17-month lows.

Sterling was held in tight ranges with no domestic developments. GBP/USD edged higher amid a soft dollar and briefly traded above 1.2500 before settling around 1.2485.

Commodity currencies secured only marginal gains despite a fragile dollar. AUD/USD settled around 0.6680 on Monday and was unable to make headway on Tuesday. USD/CAD edged below 1.3550 but failed to extend the move lower.

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