Daily currency report

Both key interest rate decisions went as expected as the Bank of England cut the cost of borrowing by a quarter point to 5 per cent while the European Central Bank left rates unchanged at 4 per cent.

Sterling (GBP)

The Bank of England's monetary policy committee cut interest rates by a quarter of a point to 5 per cent in an attempt to counteract the effects of the global credit crunch on mortgage markets. The move marks the third such cut in the past five months and takes Bank rate to its lowest in more than a year. While the sterling did manage to end slightly up against the major currencies, the pound remains perilously close to its record low versus the euro.

US Dollar (USD)

There is little support for the dollar across the currency exchanges as economic data continues to paint a gloomy picture of the state of the US economy. The trade deficit surprisingly widened to $62.3 billion despite a fall in oil imports and a persistently weak dollar. The concern is that the weakness of the US dollar will have led to a sharp increase in import prices which will in turn only add to inflation.

Euro (EUR)

The euro had yet another good day on the exchanges, posting a fresh record high against sterling and also rising versus the dollar, supported by the Central Bank as they left rates on hold at 4 per cent.

Japanese Yen (JPY)

Japanese finance minister, Fukushiro Nukaga, stated that recent exchange rate movements would be on the agenda when the G7 finance ministers begin their meeting in Washington. Nukaga went on record to say that exchange rate volatility was undesirable, and could well weigh upon economic growth.