The sterling sustained its recent strong performance, posting further gains against both the US dollar and the euro. However, it was the euro that remained in the spotlight as investors continued to dump the single currency in the belief that the European Central Bank will have little option other than to cut rates at the next monetary policy meeting. Elsewhere, the US Federal Reserve released the minutes from the last monetary policy meeting and, as expected, the Fed remains pessimistic about growth prospects over the coming 12 months.

Sterling

The pound strengthened against the euro and the US dollar for a second day, although analysts have attributed this more to broad-based euro weakness and also a correction of the sharp sell-off sterling in the run-up to the New Year.

US Dollar

The dollar soared to a new three-week high versus the broadly weaker euro and to a one-month peak against the Japanese yen. The moves came in spite of existing US home sales data, which plunged to a seven-year low in November as rising job losses and a deepening economic recession kept potential house buyers on the sidelines.

Euro

The single currency fell across the board after the latest data and comments from eurozone monetary officials heightened expectations of further interest rate cuts from the European Central Bank as early as next week. The single currency came under heavy selling pressure as soft inflation data furthered the argument for monetary easing.

Japanese Yen

The Japanese yen snapped its losing streak against the US dollar and also rose versus the euro as a pessimistic series of minutes from the last Federal Reserve policy meeting spooked investors and led to a further entrenchment of risk aversion.