Monday was a quiet day in the currency markets as the Easter holiday continued, leaving both the UK and eurozone calendars essentially empty. Still, last week saw sterling rise by more than one per cent versus the euro while the Federal Reserve responded to growing signs of panic in financial markets by announcing fresh liquidity injections and cutting its interest rate by 75 basis points to 2.25 per cent

GBP

The pound bounced back to close last week at a healthy one per cent up on the euro, after the release of Friday's UK retail sales. Strong numbers like this are always interpreted as positive for the pound, and if we see further strength from the UK economy from this week's data releases, investors may begin to price out any chance of a rate hike soon.

USD

The volatility in foreign exchange markets forced the dollar to fresh record lows last week, before a dramatic turnaround as commodity prices tumbled and traders cut back their bets against the dollar. Oil went down as much as four per cent dipping below $99 a barrel and commodities such as gold and platinum posted their biggest weekly losses in years. As investors slashed their long exposure to these assets, they covered short positions in the dollar, lifting the dollar from historic lows.

EUR

After so much focus on the problems in the US capital markets in the past several weeks, currency traders may be turning their attention to Europe as they take a more sceptical view of the European financial sector.

JPY

The yen fell against all of the major currencies as an advance in US stocks prompted traders to return to carry trades. Japan's yen weakened versus the dollar on speculation the Federal Reserve's interest-rate reductions and other efforts to spur lending will help revive economic growth.