The US saw its largest bank failure with Washington Mutual, as it was taken over by regulators and sold on to JP Morgan. In the UK the latest casualty to be hit by the credit crunch was Bradford and Bingley, the eighth largest bank in the UK.

Sterling (GBP)

Trading in the pound was determined by the events unravelling in the US. Consequently, sterling reached a one month high versus the US dollar as it seemed the US Congress bail out was slipping away, before the USD fought back as the probability of a deal increased. Bradford and Bingley became the latest casualty in the UK, however officials from the Treasury and the Financial Services Authority have acted swiftly. They have been in talks with executives from the bank to nationalise the bank and sell off its savings books and branches.

US Dollar (USD)

In the US both congress parties finally agreed on a package that will allow the Treasury to spend up to $700 billion on buying debts from ailing banks in the US. Markets are waiting for US lawmakers who will vote regarding the proposal.

Euro (EUR)

Europe also got sucked in the credit crunch, with the latest victim being Belgian-Dutch Group, Fortis Bank, which had to be rescued. The chef economist called on the European Central Bank to cut interest rates. Consumer sentiment figures showed a marginal improvement on lower energy prices.

Japanese Yen (JPY)

Last week saw Japan appoint their new Prime Minster, Taro Aso, and also his cabinet. The yen remained firm on the back of uncertainty in global markets concerning the US bailout plan. Also Japan's trade figures swung into deficit for the first time since 1982 during the month of August as exports to the US fell sharply.