The pound continued its strong start to the week, adding to recent gains against the US dollar and also touching upon a two-week high against the euro. It was a different story for the euro, however, as data showed that unemployment rose to its highest level since 2005, and manufacturing data yet again disappointed.

Sterling

The pound soared against the dollar, the euro and yen as the Nationwide Building Society revealed that UK house prices rose unexpectedly last month by 0.9 per cent. Sterling subsequently rose to a two-week high against the euro. Investors, however, were also reminded about domestic financial qualms as Bank of England policymaker David Blanchflower stated that the UK is yet to feel the pressures associated with rising unemployment.

US Dollar

The dollar started strongly as the recurring theme of risk aversion continued as uncertainty over the fate of the US car-makers and falling share prices prompted investors to seek safer assets and the dollar profited against the euro.

Euro

The euro capitulated to two-week lows against both the pound and the dollar. A report revealed that Europe's jobless rate climbed to the highest level in almost three years, adding to evidence that the jaws of recession are continuing to bite. Investors will be intently watching the European Central Bank meeting as it is expected to cut interest rates from 1.5 to one per cent. However, much of the focus will be based on whether officials hint at plans to adopt unconventional policy measures, such as buying bonds to increase the money supply.

Japanese Yen

Japan's Nikkei average climbed three per cent, adding to its hefty gains the previous day, as exporters such as Sony Corp. jumped on the bandwagon of growing optimism over the US economy and the weaker yen.