Daily currency report

The greenback was again sold off as economic data continues to point to a probable second interest rate cut. Elsewhere, the sterling recovered from weak consumer confidence data and another wobble over the Northern Rock affair to end higher across the board.

GBP
The sterling rose to a seven-week high against the dollar as investors decided to sell the greenback on expectations of more interest rate cuts. The pound had initially been trading lower as reports about a further £5 billion borrowing by Northern Rock reignited concerns on financial sectors health. However, as concern continues to grow over the US economy, the sterling was able to reverse losses and end higher across the board.

USD
The dollar hit record lows against the euro and a range of other currencies after tame US inflation data bolstered the case for more interest rate cuts. Core consumer prices data fuelled expectations that Bernanke will seek to further reduce borrowing costs in order to prevent credit markets problems becoming a full-blown recession. Consequently, the greenback was heavily sold off.

EUR
The ECB's rate-setting committee is due to meet this week. No change is expected in the eurozone's four per cent key interest rate, with investors urging caution in the face of fragile stock and credit markets. However, Trichet has maintained recently that Europe's economy remains strong, and has warned of the threat of inflation.

JPY
Japanese industrial output rose in August and is seen increasing further while core consumer prices fell from a year earlier for the seventh consecutive month. Figures out from the BoJ's Tankan survey supported the view that the BoJ will raise rates slowly, but most likely not this year.