Sterling dropped against the euro, stung by speculation about demand for euros at the end of the second quarter, while the single currency was also boosted by a smaller-than-expected takedown of three month funding. Elsewhere, the US dollar was up against the yen, but down on the sessions high when US private sector employment came in weaker than expected. This drove haven demand and reversed an early rally in commodity linked currencies.

Sterling

Sterling dropped against a basket of currencies, as a report showed Britain's consumer confidence fell to the lowest level in six months. Bank of England policy maker Adam Posen claimed the UK's economy is "tentatively" recovering. Nevertheless, the pound has now advanced by 8.8 per cent against the euro in the second quarter.

US dollar

The dollar strengthened as the combined impact of a weaker than expected ADP employment report and Moody's warning over Spain's rating allowed for a pick up in safe haven flows back into the dollar. However, risk appetite did not collapse, but it is looking very vulnerable following weaker than expected US economic reports.

Euro

The euro held gains after banks borrowed fewer funds than expected from the European Central Bank easing concerns over European banks funding issues and raising risk appetite. The results were keenly awaited as a gauge of how reliant European banks are on the ECB emergency funds. The ECB said 171 banks borrowed €131.9 billion over three months, which was below expectations of €210 billion.

Japanese yen

The yen held gains helped by good economic data and weak equity markets. The Bank of Japan's tankan survey of business sentiment climbed 15 points in June to plus one. Japanese business confidence has now hit its highest level in two years.