Daily currency report

The US dollar managed to claw back some of its earlier losses against both the euro and the pound as a decline in oil prices and better than expected bank earnings lent the greenback a degree of support. The sterling begins the week under early selling pressure following comments from MPC member David Blanchflower, quoted as saying that the UK is heading into a recession.

Sterling (GBP)

The sterling dropped against the dollar and euro as investor confidence in the UK economy took another knock. The moves came following a report in the Financial Times that Britain's Treasury was working on a plan to allow for increased government borrowing. The sterling also came under pressure following data from Rightmove, which revealed a two per cent drop in house prices last month.

US Dollar (USD)

The dollar firmed slightly against the other major currencies boosted by the news that Citigroup had posted a smaller-than-expected loss in Q2. The news helped to allay some concerns about America's banks health in the wake of the collapse of the subprime mortgage market and subsequent credit crunch.

Euro (EUR)

The euro was further weighed down by mixed economic data. On one hand, German PPI rose to a 26-year high of 6.7 per cent year on year in June, while on the other hand, the eurozone posted a €4.6 billion trade deficit in May, which was significantly worse than the €1 billion deficit analysts had forecast. The news underscored concerns that a slowing global economy and the strength of the euro are choking off demand for eurozone exports.

Japanese Yen (JPY)

The yen traded lower across the board as the jump in equity markets drove investors to seek out carry trade opportunities whereby they borrow in Japan and invest in higher yielding markets.