The sterling enjoyed another good session against the euro and held steady versus the US dollar in spite of forecasts from the International Monetary Fund that the UK economy is set to contract by some 2.8 per cent this year. This compares unfavourably with forecasts for the US and eurozone, which the IMF predict will contract by 1.6 and 2.0 per cent respectively.

Sterling

The sterling held its own against the US dollar and even made fresh one week gains against the euro despite comments from the Bank of England's David Blanchflower, who said that sterling was overvalued. The comments came just after Gordon Brown had warned against attempts to managing sterling. Furthermore, the IMF announced that the outlook for UK growth had moved to the bottom of the G8 list of countries.

US Dollar

A wave of safe-haven buying bolstered the US dollar as equity markets declined as a result of weak economic data. New home sales slumped reaching the lowest point since record keeping began in 1963.

Euro

The single currency came under heavy selling pressure as evidence is growing that the situation in the eurozone is little better that the UK economy. M3 money supply figures showed loans to firms and consumers falling for the first time. Sentiment figures hit record lows in January to 68.9 the lowest since record keeping began in 1985. Inflation expectations also showed signs of weakening.

Japanese Yen

The Japanese yen rose across the board as data revealed that Japan's industrial output declined 9.6 per cent in December. This marked the biggest contraction since records began. The unemployment rate also rose in December to 4.4

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