Investors kept half an eye on the Federal Reserve's policy meeting over in the US as well as the world economic forum in Davos, Switzerland. Given the current scale of the economic downturn, markets will be looking for any concrete suggestions as to how to restore order to the financial system and lay the foundations of a return to growth. As a result, trading across the exchanges remained relatively range-bound, although sterling was able to maintain the steady progress of Monday and Tuesday and, by the close of play, the pound was up against both the dollar and euro.

Sterling

The pound rose to one-week highs against the dollar and yen as a third day of gains on the world stock markets signalled investor tensions easing and a moderate return to speculation. The sterling has gained more than three per cent on a trade weighted basis in the past three days, after slumping seven per cent in the previous week.

US Dollar

The greenback slipped back against the resurgent euro and British pound as additional improvements in risk appetite dulled some of the dollar's safe-haven allure. Nevertheless, the dollar's decline was relatively limited as investors bided their time prior to the conclusion of the Federal Reserve's monetary policy meeting, in which the Federal Reserve opted to keep interest rates unchanged and pledged to "employ all available tools" to revive the economy.

Euro

The euro was supported throughout trading on the back of better than expected economic data. German and French consumer sentiment figures as well as Italian business confidence figures all came in above market forecasts, immediately easing pressure on the single currency.

Japanese Yen

The yen rose broadly despite signs of a possible improvement in risk appetite.