Daily currency report

The sterling fell to its lowest level against the euro in over two months after weak British retail sales growth in July. Elsewhere, in the States the Fed announced that interest rates will be held at 5.25 per cent emphasising its primary concern on inflation, cooling expectations for an interest rate cut in the coming months.

GBP
British retail sales growth in July slowed to its weakest rate in eight months according to the British Retail Consortium. The BoE is expected to revise down 2008 growth forecasts and show inflation coming down to two per cent by the end of this year in its inflation report. A recent run of soft data is denting expectations of future interest rate increases, putting downward pressure on the pound.

USD
In its policy meeting, the Fed held interest rates at 5.25 per cent, reiterating that inflation control is their main concern. In its post-meeting statement the Fed said the economy was likely to expand at a moderate pace in the coming months.

EUR
On the exchanges, the euro remained firm during trading, holding on to recent gains, notably against sterling. Also helping the euro is a growing belief that the ECB will raise interest rates in September to a six-year high of 4.25 per cent.

JPY
The yen rose across the board, climbing by nearly one per cent against the AUD and the NZD. The yen was the only currency that managed to end the trading session in positive territory against the dollar. Yen trading appears to be working in correlation with US stock price, with traders financing the purchase of US equities by borrowing in Japan.

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