Sterling was able to hold on to recent gains during trading as markets prepare for what promises to be an eventful session. Both the European Central Bank and the Bank of England are set to make policy announcements, with traders betting that the European Central Bank is set to cut rates to an all-time low of one per cent, while the Bank of England will instead opt to hold rates at their current level of 0.5 per cent.

Sterling

Sterling managed to hold on to gains against the US dollar and euro. The appetite for risk that saw sterling reach four month highs the previous day continued ahead of the Bank of England's monetary policy announcement. The gains were due to stronger than expected figures for UK service sector data.

US Dollar

The US dollar slipped against sterling as leaked results from the US Treasury's stress tests showed that only 10 out of the 19 banks will be required to raise capital, and that none of those institutions are insolvent. If confirmed, the results are far better than had been anticipated and are likely to tempt investors back into riskier trades. This, in turn, could help to keep the greenback under pressure.

Euro

The euro continued to slide against the pound, as Retail Sales in countries using the euro fell by a record amount over the last 12 months according to the EU's official statistics agency. Figures showed that sales fell by 4.20 per cent between March 2008 and 2009 in the 16-member trading bloc and 3.1 per cent over the year.

Japanese Yen

The yen fell against a basket of currencies and hit a seven month low against the Aussie dollar following the release of surprisingly strong regional jobs data in Australia. The yen remains under pressure as a general election must take place before the end of October at the latest.