The sterling enjoyed a reversal of fortune, jumping to a one-week high against the US dollar and the Japanese yen, boosted by easing risk aversion and better results from the UK banking sector. Nevertheless, early gains against the euro were pared slightly as the rally spread to eurozone banks. Elsewhere, mixed housing data from the US and the cautious return to riskier equity investments led to increased selling pressure on the US dollar.

Sterling

The sterling recovered from a 23-year low against the dollar as the greenback gave up some of last week's gains across the board. The pound was also buoyed by news from Barclays that it expects a 2008 pre-tax profit of over £5.3 billion, which includes an £8 billion write-down in bad assets. The news boosted UK shares and helped sterling claw back some of last week's steep losses as investors took profit.

US Dollar

The dollar lost ground as a recovery in European equity markets enticed investors and traders back to riskier ventures. There was a rare moment of good news for the US housing industry as existing home sales were revealed to have risen 6.5 per cent in December while the inventory of homes available for sale fell by 11.7 per cent.

Euro

Much like its sterling counterpart, the euro's movements were in the main dictated by equity market movement which drove the single currency up from last week's lows against the greenback.

Japanese Yen

With the Chinese New Year celebrations seeing its major market contenders in the Far East closed in the early part of the week, trade in the yen very much dictated by activity in European and US stock markets.