Daily currency report

It was a tumultuous day for the pound as it retreated from a four-month high against the dollar and a two-and-a-half month high against the euro. Traders were surprised by the Bank of England's revelation that it would extend its quantitative easing policy by committing more funds to the UK asset buying scheme. Such an announcement had certainly not been expected so soon. The European Central Bank and the Bank of England reduced the cost of borrowing by a quarter per cent respectively leaving both at record lows.

Sterling
Despite leaving interest on hold at the current record low of 0.5 per cent, the Bank of England decided to expand their asset purchases by £50 billion. This measure came as a surprise to many traders and the pound was sold off accordingly. Furthermore, the Royal Bank of Scotland announced a pre-tax loss of £44 million for the three months to the end of March which contrasts heavily with a profit of £479 million one year ago.

US Dollar
Trading in the US dollar took direction predominantly from key data released in both the eurozone and the UK. After a shaky opening, the greenback eventually erased early losses against the pound but fell to a one-month low against the euro.

Euro
The euro recovered much of the losses suffered in recent days against the pound as it was rewarded by traders on the back of the European Central Bank announcing that it would slash interest rates to one per cent and that it would start buying covered bonds so as to inject markets with €60 billion.

Japanese Yen
The yen slipped against the dollar and the euro after the results of the US Treasury's banking stress test removed a major uncertainty in financial markets. Market attention will now turn to the US non-farm payrolls report as investors ponder their next move.