Daily currency report

Traders aggressively backed the US dollar as data released showed that the trade deficit shrank 28.7 per cent in November, the biggest contraction in 12 years. The dollar's rise spelt bad news for the other major currencies, with both the sterling and the euro losing significant ground. The sterling ended the session over 1.5 per cent lower against the greenback at close to a 14-year low against the Japanese yen as data continued to illustrate a sharply slowing economy.

Sterling

The sterling lost yet more ground against the US dollar as economic data showed that Britain's economy went into steep decline at the end of last year. Retailers suffered the worst December on record as businesses slashed jobs and home sales slumped to another low. The British Chamber of Commerce published its quarterly economic survey which revealed a "frightening deterioration" at the end of last year as sales, orders, investment, employment expectations, cash flow and confidence fell at the fastest pace since its survey began in 1989.

US Dollar

The dollar received a further boost after weak consumer demand and plummeting oil prices led to a record drop in imports. Exports also dropped for the fourth consecutive month.

Euro

The euro came under heavy selling pressure as investors await the European Central Bank policy meeting when analysts expect a rate cut of 50 basis points to 2 per cent or possibly more. Speaking earlier, President Jean-Claude Trichet gave no hint on interest cuts but did go on to comment that the eurozone is facing pressing challenges and that there is no time for complacency.

Japanese Yen

The yen rocketed to a 14-year high against the sterling as evidence continues to emphasise the severity of the economic slowdown in the UK.