The sterling benefited from a combination of better than expected data from the services sector, but also capitalising on broad-based euro weakness. Weighing on the euro was the news that Fitch's Ratings downgraded Russia's sovereign credit rating to "BBB", and said that more cuts were possible due to low commodity prices, dwindling reserves and corporate debt problems.

Sterling

The sterling rose against both the euro and the US dollar as the CIPS PMI services data revealed that the pace of contraction in Britain's services sector eased last month. Markets responded positively to the news, bidding up the pound, although the extent of the sterling's gains was limited by the prospect of an interest rate cut as well as separate data that revealed crumbling consumer confidence.

US Dollar

The greenback slipped back against the pound but held steady against the euro as Fitch's downgrading of Russia's debt spooked investors and prompted them to move away from risky positions.

Euro

The single currency came under the cosh as data showed that eurozone retail sales fell in December as a result of shrinking consumer spending, and November's figures were also revised downwards to show a bigger decline than first thought.

Japanese Yen

The Japanese yen took back losses as traders backed away from risk heading into this week's interest rate announcements. The Nikkei closed over one per cent lower in spite of comments from Bank of Japan and government officials.