Sterling rose after a slight improvement in inflation expectations, though analysts still expect economic and political concerns to keep the pound under pressure ahead of an upcoming general election. Meanwhile, the dollar fell against the yen and euro after the US trade deficit for January came in narrower than expected as a result of weak exports and sharply weaker imports. Nevertheless, according to Standard and Poor's the US dollar is still the most important world currency, however, they warned that rising levels of US debt and dependence on overseas investment for finance pose risks to the currency's primacy.

Sterling

The pound steadied above recent week lows against both the greenback and the yen, receiving a boost in the late session from a bout of profit taking on its recent losses. The Bank of England's survey that pointed to a modest pick up in inflation sentiment over the coming year, also aided sterling's modest growths.

US dollar

The dollar lost ground against the yen and euro after the US trade deficit for January came in narrower than expected, with the balance suggesting more net exports in the first quarter than previously forecast. The data showed the US trade deficit shrank to $37.29 billion in January from a revised $39.9bn in December, against the expectations of a $41bn for the month.

Euro

The single currency continues to find support from a slightly weaker greenback. The Greek story continues to take the centre stage with rumours that Greece would have to issue bonds again soon. Whilst more issuance is inevitable, such a quick issue might not be as well received and could weigh on risk appetite.

Japanese yen

The yen dipped, dented by speculation that the Bank of Japan could further relax its monetary policy in the near term. Investors increasingly expect the Japanese Central Bank to further ease monetary policy at its meeting between March 16 and 17.