Daily Currency Report

Stronger than expected retail sales in the UK boosted the sterling against the euro and the dollar ahead of the two-day Bank of England MPC meeting starting today while retail sales figures in the eurozone were also announced showing disappointing figures.

GBP
The British Retail Consortium survey reported the strongest January sales in three years. Same store sales rose 3.1 per cent while total sales increased 5.2 per cent on year-over-year basis. Both numbers beat market forecasts demonstrating the strength of UK consumer demand.

USD
With no US economic data due for release, the dollar fell against major European currencies, weighed down by the recent strength in oil prices and as traders adjusted positions ahead of the G7 meeting in Essen this weekend.

EUR
In the eurozone retails sales figures were announced, which were not as buoyant as expected, showing only a 0.30 per cent rise versus 1.1 per cent projected by most analysts. However, the year-on-year comparison was more positive with sales rising 2.1 per cent versus 2.3 per cent forecast.

JPY
The yen slipped broadly after US Treasury Secretary Henry Paulson said the Japanese currency's value is set by fundamentals. His comments suggested that the US government does not see anything fundamentally wrong with the yen's broad weakness, which looks set to continue after recent data indicated that Japan's domestic economy continues to struggle to match that of the US and the UK.