Daily currency report

The fact that the losses on sub-prime mortgages could hit $100 billion and curb consumer spending in the US, has provided the recurrent theme on a week where the dollar faced sustained pressure from both the pound and the euro. Gold climbed to a 10 week high, boosted by firm oil prices and the weaker dollar.

GBP
The sterling retreated momentarily against both the dollar and the euro in the wake of weaker than expected UK retail sales data for June. The upshot of this is that consumer spending is gradually slowing and coupled with Wednesday's BoE minutes, the inference is that borrowing costs may peak at six per cent.

USD
The dollar flirted near record lows against the euro in the wake of the Fed's Chairman second day of testimony. Bernake provided further ammunition against an ailing dollar by stating to the Senate Banking Committee that sub-prime mortgages losses could hit $100 billion curbing consumer spending. Bernanke also stressed the fact that inflation remains a concern, the latter interpreted by the market that the Fed looks unlikely to cut borrowing costs this year, despite the deepening housing slump.

EUR
With the euro reaching record highs against the dollar, International Monetary Fund's Chief economist Simon Johnson stated that the euro was fairly valued and he was comfortable with its present value. Johnson also claimed that the ECB was managing inflation expectations which are important.

JPY
The main concern for Japan's economy is that there remains, according to Mr Johnson, steady growth despite a puzzling lack of inflation. This has concerned the BoJ's decision to keep borrowing costs at the lowest level of all the major economies.