Sterling rose against the dollar and euro, extending gains from the previous session on the view that the UK economy is on the road to recovery. The UK currency continued to benefit from broad falls in the dollar on rising risk appetite and investor scepticism as to whether the US economy will recover sufficiently for interest rates to start rising by the end of the year. Mixed eurozone industrial production numbers had little impact on the broadly stronger single currency, which has made up over half of the losses it suffered against the dollar in the wake of yesterday's better than expected US job data. Meanwhile, across the pond we saw America's trade deficit widen in April for a second month as exports dropped to their lowest level in almost three years, offering little sign of an end to the worst of the global recession.

Sterling

Sterling strengthened in tandem with other perceived higher risk currencies, such as the Australian dollar, as rising equity and oil prices encouraged investors to take on more risk.

US dollar

The dollar fell again as higher oil prices and rising shares on the Japanese Nikkei exchange helped boost risk appetite and the shift to commodity-linked currencies. However, the sell-off was muted as, like the previous session, investors are waiting to see if an auction of 30-year Treasury bonds will again highlight the ballooning US budget deficit.

Euro

The euro continued to rise against an under pressure dollar. The single currency's strength appears to be more a function of dollar weakness than any fundamental improvement in the outlook for the 16 member bloc's economy.

Japanese yen

The yen has seen very little trade, despite rising equity markets, with Japan's economy continuing to shrink at its fastest pace since World War II. Economists, however, expect it to start making a slow fragile recovery in the current quarter but predict the yen to suffer further weakness in the months to come.