Daily currency report

With no data being released, the sterling was left at the mercy of both the euro and dollar movements. The European Commission released a report stating that the British economy would fall more than first expected in 2009 and that the eurozone was emerging from a recession. Elsewhere, the dollar continued to weaken against a basket of currencies as worries about a trade war between US and China subsided after both parties agreed to take their dispute, about US tariffs on tyre imports to the US from China, to the World Trade Organisation.

Sterling

Sterling retreated from one-week highs hit against the dollar as weaker equity markets spurred profit-taking in riskier currencies and investors braced for a raft of UK economic data later this week. Sterling also lost ground against the euro on some profit-taking and was weighed down by a European Commission report saying the British economy would contract more than previously thought in 2009, although it would return to growth in the third quarter.

US dollar

The dollar continued to weaken against a basket of currencies with little in the way of market data due for release.

Euro

The euro enjoyed a pretty steady trading session, strengthening against sterling early on in the day after official figures showed that the eurozone is emerging from recession. The release confirms the view that the pace of decline has diminished significantly, but does not alter the outlook for monetary policy by the European Central Bank and it therefore had very little impact on markets.

Japanese Yen

The yen was taken off its highs on the back of safe haven buying when comments from the Ministry of Finance suggested that they were watching markets and were not happy about the rapid pace of the yen's appreciation.