Sterling fell against the dollar, retreating from early gains and also rallying against the euro. Analysts said sterling barely reacted to data showing UK factory gate inflation slowed more than expected in June. PPI data showed that on a monthly basis prices fell for the first time since November 2008. The fall supported the Bank of England's view that recent rises in inflation have been purely temporary. The pound was sold off as markets priced out any short term interest rate rise.

US dollar

The US dollar hit seven-week lows against the euro as a mention of a double dip recession caused the US dollar to weaken across the board.

Euro

Despite the euro's recent rallying seen in last week's trading, the eurozone's debt problems have discouraged investors from taking long positions in the euro. Strategists continue to forecast a weaker euro on concern that Europe's fiscal crisis may expand beyond debt-laden Greece and Spain to Germany and France. For the time, the euro seems to be well supported recovering from seven-week lows against the US dollar and hitting six-week highs against sterling.

Japanese yen

The yen reached a two-week low against the US dollar after Prime Minister Naoto Kan's party lost control of Japan's upper house of Parliament, undermining his efforts to rein in the world's largest public debt. The yen fell as Standard & Poor's said Mr Kan's defeat is "potentially negative" for Japan's debt rating because of legislative gridlock.

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