Daily currency report

The sterling took a bit of a pounding in the markets as news that the government plans to temporarily nationalise mortgage lender Northern Rock added to worries about the UK economy, and as a result the pound has been sold off.

GBP

The sterling came under pressure, reaching a near one-week low against a broadly stronger euro and taking a breather versus the dollar after having climbed solidly earlier in the week. The fall has continued as news emerged that the beleaguered Northern Rock is going to be nationalised, putting further pressure on the sterling.

USD

The dollar was fairly steady versus the yen and the euro, but up against the pound as many investors await data out later in the week to give further clues on the health of the economy. Data out showed US consumer sentiment fell to a 16-year-low, reviving fears that the economy was slipping into recession while reinforcing expectations for more Federal Reserve rate cuts.

EUR

The euro faired well against the dollar as the European Central Bank's hawkish monetary policy and continued weakness in the US economy forced the euro higher. However, with eurozone growth slowing, it will make it much harder for the ECB to remain hawkish, and at some point they may have to review their stance with regards to not cutting interest rates if the slowdown in growth continues.

JPY

Following on from the Bank of Japan's policy meeting at which they left interest rates on hold, sentiment among Japanese manufacturers worsened to a three-year low in February, hurt by rising raw material costs and lacklustre personal consumption, a Reuters survey showed.