Daily Currency Report

The Sterling weakened against the euro after lower than forecasted industrial output figures ahead of the Bank of England's interest rate decision.

GBP
UK industrial output went against analysts' expectations in December as mild weather and increased imports dented domestic gas production. Nevertheless, analysts do not think the outlook for the monetary policy will be affected by the data. The markets widely expect the BoE to keep rates on hold at 5.25 per cent today.

USD
In the absence of any significant data, the US dollar traded within recent ranges as investors preferred to focus on the forthcoming G7 meeting. While European officials have been very vocal in their desire to see a stronger Japanese yen, the US Treasury Secretary, Henry Paulson, was dismissive of these concerns. According to Paulson, the yen's value accurately reflects economic fundamentals, which traders said implied that the US government had no problem with the Japanese currency's weakness.

EUR
The euro saw little movement against the dollar and pound, but rose steadily against the yen. German trade surplus figures came in lower than forecasted this morning at €17 billion, shrinking from Novembers revised €19.1 billion ahead of the European Central Bank's interest rate decision today.

JPY
The yen dropped overnight, pulling away from a one-month high against the dollar on doubts that the G7 nations will issue a statement on the weak yen when they meet this weekend.