Daily Currency Report

The pound lost some ground against the dollar and the euro following a relatively poor UK output figure release and uncertainty over the future of Prime Minister Tony Blair. The dollar was somewhat of a winner though, after a surprisingly big jump in US labour costs suggested that the Federal Reserve might have to raise interest rates further.

GBP
The sterling was a little sensitive during yesterday's trading prior to today's BoE interest rate release and because of this, any poor data released was likely to impact the pound quite strongly. Therefore, when poor UK output figures were released, it came as no surprise that the pound was heavily sold off. Exacerbating matters further is the turbulence surrounding the leadership of PM Tony Blair.

USD
Having been boosted by an unexpected jump in US labour costs, the dollar gained ground against the sterling by five per cent.

EUR
Without much data being released from the eurozone, the euro still managed to claw back some of its recent losses against the pound. The eurozone economy has been looking up recently with the theory now being that interest rates are likely to be increased over the coming months until a "neutral" level of 3.5 per cent is reached.

JPY
Despite the BoJ increasing the base interest rate in Japan in July for the first time in many years and the Japanese economy showing signs of picking up, the yen has been on the slide recently, reaching a few year lows against other majors.