The sterling strengthened against the euro and the dollar; however, recent monetary tightening is starting to bite. Elsewhere, the yen remained near a three-month high against the greenback as fears over the US credit market and recent falls in equity markets prompted investors to reverse their USD/JPY positions.

GBP
The CBI urged the BoE to hold back on further interest rates increases after a snapshot of the high street showed slowing growth as higher borrowing costs are impacting demand. However, as the BoE convenes its two-day policy meeting, analysts remain convinced that interest rates will hit six per cent before the end of the year.

USD
With initially calmer markets the dollar drifted higher versus the yen and fell against the higher yielding sterling and euro. However nerves returned regarding the state of the credit and mortgage markets sending the dollar to a session low against the yen, recovering against the sterling and the euro, highlighting the current volatility in the markets.

EUR
The EC's economic confidence survey confirmed that recent signals that economic growth is continuing at a pace enabling the ECB to continue focus on inflation risks, supporting the ECB's argument that further monetary policy tightening is required. However, the eurozone flash CPI estimate showed a slower annual growth, showing inflation may not be as concerning as they seem to think.

JPY
The yen strengthened during late trading, as concerns about the credit markets came back into focus. Earlier, the yen came under pressure as higher yielding currencies gained ground as global equities started to recover. With risk aversion set to continue, yen buying could continue, further strengthening the yen.

Commercial Foreign Exchange Travelex Malta, freephone: 800 77 33 22, www.travelex.com/mt/