Both sterling and the euro start business at near nine month lows against the US dollar as repercussions from the US Federal Reserve's decision to raise their discount rate are being felt across the markets. Even before the impact of the US lending rates increase sterling was under pressure, after public sector borrowing figures came in as a deficit for the first time for January figures since records began in 1993. The euro was still under selling pressure as ubiquitous debt worries continued. The euro hit decade lows against the Australian dollar and kicked in business at nine-month lows against the US dollar.

Sterling

Sterling did not enjoy the best of starts falling as public sector net borrowing came in at a deficit of £4.34 billion versus a repayment of £5.3 billion a year ago. Economists had predicted the Treasury would make a repayment of up to £2.8 billion in January. It was the first time the government has had to borrow more than it repaid since records began in 1993. The rise was due to government spending increasing by 3 per cent from last year to £14 billion and income tax receipts falling by a fifth to £19.4 billion year on year.

US Dollar

The US dollar hit nine month highs as the Federal Reserve raised its discount rate to 0.75 per cent from 0.50 per cent. The timing of the decision had the most impact on markets.

Euro

There was no significant data out in the eurozone, however selling pressure remained high on the euro. This was partly due to concerns amongst analysts, who said that if countries such as Greece implemented the fiscal measures needed to cut their debt it would weigh on eurozone growth prospects. This would in turn mean the European Central Bank would be slower in tightening monetary policy.

Japanese Yen

The yen fell to one month lows against the US dollar on the back of the Federal Reserve increasing its discount rates. The move by the Fed to raise the rate it charges for its emergency lending has provided Japanese exporters with a good opportunity to unload yen positions.