Daily currency report

The sterling gained strength against the euro while it remained steady against the US dollar after initial gains in the early trading session. Elsewhere, US housing starts are expected to signal further stabilisation in November, levelling out after the severe weakness experienced in the first half of the year. In policy events, ECB President Jean-Claude Trichet speaks from Frankfurt.

Sterling

Sterling hit a two month high against the euro after a jump in UK inflation fuelled speculation the Bank of England may be nearing the end of its quantitative easing programme. However, initial gains against the dollar were ultimately reversed due to safe-haven demand triggered by disappointing US data.

US Dollar

The dollar rebounded from a 15-month low against a basket of currencies after industrial production and wholesale prices in the US rose less than forecast in October, giving the Federal Reserve more reason to keep interest rates near a record low for an "extended period."

Euro

The euro dropped against the dollar amid broad strength in the US currency while holding gains against sterling. The 16 countries that use the euro posted an unexpected trade surplus in September, official figures showed. eurozone trade figures swung into surplus of 3.7 billion, which was better than the market predictions which had expected smaller narrowing of the deficit.

Japanese Yen

Japan's Nikkei stock average fell 0.6 per cent to its lowest close in six weeks. Concerns regarding banks and property firms joining a rush to tap the equity market for capital weighed on shares in those sectors. After the exchange's close, Mitsubishi UFJ financial group posted a 59 per cent rise in quarterly profits helped by stronger lending.