The pound benefitted from the news that Lloyds were set to merge with Halifax Bank of Scotland and an unexpected rise in UK retail sales. The sterling held onto gains against the euro, but lost ground against the US dollar as the greenback advanced when Wall Street saw a massive 400-point rally. The gains came after the US government announced plans to buy up bad debt from financial institutions and after the coordinated efforts by central banks to ease money market conditions and lower interbank lending rates.

Sterling (GBP)

The sterling gained ground following the release of UK retail sales data that unexpectedly jumped for the second consecutive month. Nevertheless, any boost to the sterling's value is likely to be short-lived, as the majority of market players are still anticipating a series of Bank of England rate cuts over the coming months as the threat of recession looms.

US Dollar (USD)

The US dollar started trading on a weak note versus most of the majors, but ended recovering nearly half of its losses. The news that the government is formulating a "permanent" plan to aid the financial markets and furthermore, proposed new rules against short sales in the US and the Federal Reserve's $180 billion emergency liquidity injection helped to improve investor confidence.

Euro (EUR)

In the absence of key data releases, trading in the euro took its cue from the US dollar, with the single currency benefiting the most from any dollar weakness. Nevertheless, the short-term outlook for the euro remains unclear, as investors wait to see whether the troubles besetting the UK and US economies will wreak similar havoc in continental Europe.

Japanese Yen (JPY)

The yen gave up all previous gains against the majors - especially the high-yielding Australian and New Zealand dollars - as carry trades made a comeback.