The major currencies traded within recent ranges although the pound still appears to be under pressure as markets look forward to Alastair Darling's budget later in the day. In the USA, existing home sales fell by 0.6 per cent, but market reaction was muted given that the figure was far better than the declines of 16.2 and 7.2 per cent in December and January respectively. The single currency also held relatively steady although the lack of clarity over the exact support package for Greece continues to weigh.

Sterling

The pound recovered following an earlier decline as data showed that the annualised rate of inflation fell back to three per cent last month from 3.1 per cent in January. The news was sterling negative as the implication is that price rises may have peaked and that monetary policy is set to stay loose for the foreseeable future. In reality, however, policymakers will have been pleased as it would have been difficult to raise interest rates to control inflation against a backdrop of weak economic growth.

US Dollar

The dollar hit a 10-month high against the Euro as safe haven flows continue to pick up. The dollar was also helped by the release of better that expected US homes sales which saw the figures come in at -0.6 per cent instead of the forecasted -1.1 per cent.

Euro

The Euro continued to fall against the dollar over continuing concerns that the eurozone policy makers are unlikely to reach an agreement over a rescue package for Greece at the EU summit later this week.

Japanese Yen

Yen cross trading is a little slow, due to the approach of the fiscal year end in Japan and quarter end in other countries. With yen carry-trades continuing and the upward momentum for yen crosses remaining intact, Japan is unlikely to raise interest rates for a while and is holding off from any exit strategies.