Daily Currency Report

The sterling firmed against the dollar and euro, aided by strong UK manufacturing sector data that rekindled a debate about the prospect of further Bank of England monetary tightening. The sterling also had an extra boost after the US manufacturing data came in below expectations.

GBP
The sterling hit a one-week high against the dollar after a strong UK manufacturing sector survey fanned speculation of a further BOE monetary tightening. Analysts claim the data gave investors the green light to stake out new positions after sharp drops starting last week that took sterling briefly below key levels earlier this week on Wednesday.

USD
The greenback hit a three-week low against a basket of major currencies, after an unexpected drop in US Institute for Supply Management purchasing managers' index, a gauge of US manufacturing activity fell to the lowest since April 2003. The dollar initially fell sharply on the news, but quickly bounced back, confounding most analysts.

EUR
The euro lost some ground after a survey suggested that activity in the eurozone manufacturing sector was running out of steam. The eurozone purchasing managers index fell to 55.5 in January from 56.5 in December and below analyst expectations of 56.3.

JPY
The yen's 16 per cent slide in the past three years to record lows against the euro has become the centre of attention before the G7 gathering as European officials have sought to make the currency's woes a major topic of discussion.