Daily currency report

Last week saw sterling in freefall against the US dollar as investor confidence in the UK was hit hard by the news that the Royal Bank of Scotland reported the biggest ever British corporate loss while official government figures revealed that the UK is officially in a recession for the first time since 1991.

Sterling

Following last week's bad news, further weakness in the sterling is more than likely as consumers have been hit hard by tighter credit conditions, falling house and equity markets, as well as weakened employment prospects.

US Dollar

The highlight of activity across the pond this week is going to be the conclusion of the latest Federal Reserve policy meeting tomorrow evening where it is widely expected that the cost of borrowing is kept at 0.0-0.25 per cent. Investors will also be keeping a close eye on the new Obama administrations and remain anxious to learn more about the new economic stimulus plan.

Euro

The single currency enjoyed a good week against sterling although it remains under pressure against the US dollar and yen as evidence of the global slowdown continues to manifest itself within the zone. Data at the end of last week showed that services and manufacturing activity in the Eurozone contracted at a slightly slower pace in January than in December, however, expectations persist that the European Central Bank will cut interest rates again in March.

Japanese Yen

Japan's troubles mounted as an increasingly strong yen threatened its export-reliant economy. The Bank of Japan said financial conditions have become tighter even with its benchmark rate near zero, suggesting that low rates alone may not be enough to pull the country out of recession.