The market remained rattled by the same sentiment today as the European debt crisis is still center stage. Nevertheless, amid the high uncertainty, sterling was the winning bet today as investors saw the BoE more hawkish in the quarterly inflation report which triggered the rally for sterling.

The British pound rallied to the upside where it reached the high of 1.6503 versus greenback, rising from the low of 1.6342 and currently hovering around 1.6498. The gains also extended versus the euro with the EUR/GBP slumping to the low of 0.8698 from the high of 0.8809.

Investors reacted positively on the May Inflation Report from the U.K. as King said inflation will reach 5.0% and assured the MPC will do all that is necessary to keep inflation on target. Despite the downbeat view on growth compared to the previous February report investors saw inflation more important with now the view balanced over the outlook for inflation to shoot or undershoot the 2.0% inflation target!

Sterling is back in the game with more rate bets for now which powered the rally for the royal currency versus its major counterparts. The euro on the other hand is still battered by its fiscal woes, which the BoE also said might be worse than expected.

Investors saw Germany's Merkel comments as hesitant over the backing of the EU for the Greek situation, leaving open room of speculation over what comes next for the indebted nation and shall the EU leave it to suffer which might indeed mean restructuring and even default!

This bearish sentiment on the fiscal crisis kept the euro biased to the downside, where it fell versus the dollar to the low of 1.4351 from the high of 1.4422 and currently hovering around the intraday low for the day.

We can see the jitters in the market and the stability in the U.S. data is keeping the dollar to the upside. The dollar index moved higher today to the high of 74.66 in a tight range from the low of 74.40 and now trading around 74.60 areas.

We still have trade figures from the U.S. later today where the trade deficit is expected to have widened in March and if it was confirmed on rising imports the confidence in the U.S. recovery will be supported further.