A much improved UK retail sales reading lifted sterling. The dollar fell against a basket of currencies, in particular flirting with 15-year lows against the Japanese yen. Positive news from the UK also helped the euro against the greenback as it indicated that the recovery in Europe continues.

Sterling

Sterling rose against the greenback after surprisingly strong UK retail sales data, which raised hopes that the economic recovery can maintain momentum in the third quarter. The pound surged as speculators were wrong footed by the release. UK retail sales rose 1.1 per cent in July from the previous month, sharply higher than forecasts for a 0.4 per cent gain. Public sector net borrowing figures were also released which bettered expectations. The government borrowed £3.173 billion in July versus the prior month’s reading of £13.925 billion.

US dollar

The dollar extended declines versus a number of currencies. A government report showed a higher than expected reading for US initial weekly jobless claims. New US claims for unemployment benefits unexpectedly climbed to a nine-month high. This proved to be yet another setback to the frail economic recovery and reversed trader appetite for risk.

Euro

The euro remained trading in recent ranges against most major rivals. The euro was not helped by negative press surrounding the Greek austerity programme nor by talk that credit rating agency Moody’s, continues to consider a downgrade of French debt. While these stories did not support the euro, the single currency’s downside was equally protected by the weak US economic data.

Japanese yen

The yen dipped against the dollar as jitters about whether the Japanese authorities would take new steps to rein in the yen’s rise left investors reluctant to chase it higher. Investors are watching to see if the Central Bank will take more monetary easing steps.

Commercial Foreign Exchange Travelex Malta, freephone: 800 733 22, www.travelex.com/mt/