Daily currency report

The big news last week was the Bank of England's decision to reduce the cost of borrowing in the UK by 0.25 per cent and early indications from the European Central Bank that its cycle of monetary tightening may be drawing to an end. Both currencies subsequently suffered on the exchanges, with the US dollar benefiting most, ending the week up against the other majors.

GBP

The situation for the UK looks grim as the policy statement essentially said that the BoE was more concerned that slowing growth will bring inflation below target than they are concerned that inflation will accelerate out of control, suggesting that more rate cuts may loom on the horizon as long as economic data points to deteriorating conditions.

USD

The dollar emerged as the currency of choice as it posted gains pretty much across the board. According to some commentators, the greenback's resilience in the face of such poor fundamentals points to a watershed in market sentiment, and could mark the end of the dollar's four-year losing streak.

EUR

The euro laboured under the perception that ECB President, Jean-Claude Trichet, had opened the door for a future easing of monetary in his press conference following the interest rate announcement. Over the weekend the euro managed to claw back some of the losses as fellow governing council member, Axel Weber, went on record to insist that inflation remained a priority, however most traders believe a cut of one per cent is probable before year end.

JPY

Worries about the health of the global economy highlighted at the weekend's G7 meeting in Tokyo helped the yen to start the week up versus the other major currencies.