There was a surprise for the forex markets as the Bank of England meeting minutes showed there was a three-way split in last month's interest rate decision. While seven members, led by Governor Mervyn King, voted to keep rates at five per cent and, as expected, David Blanchflower had voted for a cut, surprisingly Tim Besley voted for a rise. Markets reacted in a sterling positive way and saw multi-week highs against the euro and initial gains against the dollar.

Sterling

The unusual three-way split from the Bank of England fuelled uncertainty over the bank's next move. The split highlighted the bank's current dilemma as rising costs against falling growth has split the committee on the best way to bring inflation down while stimulating growth.

US dollar

Despite initially falling against the pound, the dollar soon rallied and ended up stronger against a basket of currencies including the euro and yen. The strength came amid falling oil prices, hawkish Federal Reserve commentary and renewed confidence stemming from government measures to support Fannie Mae and Freddie Mac.

Euro

There was little economic data of note from the eurozone, thus leading to the single currency taking direction from elsewhere. Positive news from the US and the UK weighed on the single currency and, although these are the primary reasons why the euro is trading close to a two week low, it is starting to become apparent that the eurozone economy is deteriorating.

Japanese yen

Japan's economy, buffeted by the sub-prime housing crisis and related US slowdown, faces slowing growth and the end of its longest run of expansion in more than 50 years.