The dollar swept higher in London morning trade today amid renewed hopes that the US economy is turning the corner.
Today's March US retail sales data, coming in the wake of bullish non-farm payrolls and jobless claims numbers, will be closely examined for signs that the world's largest economy has begun to recover.
Looking further ahead to US inflation and sentiment numbers later this week, Mr Mitul Kotecha, global head of forex strategy at Credit Agricole Indosuez, said: "The indications are markets may not be optimistic enough.
"The last two weeks have seen [US] data significantly ahead of expectations. This is not mirrored in the US eurozone data, which continue to lag expectations."
The dollar was given a further boost by Mr Robert Parry, the outgoing president of the San Francisco Federal Reserve, who said in an interview that 3.5 per cent is the "natural" Federal funds rate, assuming that inflation remains in the 1-2 per cent band.
With the long Easter weekend over, speculators also appeared to be willing to rebuild long-dollar positions that had been reduced prior to the break amid geopolitical uncertainty.
All this allowed the dollar to rise to a four-month high of $1.1974 against the euro, a gain of a cent. The greenback rose 1 per cent against sterling to a high of $1.8230, before settling at $1.8261.
Financial Times Service