Daily currency report

Exchanges were relatively quiet as all the major currencies traded within recent ranges. Eurozone data, while disappointing, failed to move markets and similarly the US Federal Reserve chairman, Ben Bernanke, failed to inspire investors when testifying before a senate committee.

GBP
The sterling rose to two-week highs versus the Euro and one-week peaks against the dollar as investors continued to trim back bets on future UK rate cuts in the wake of the Bank of England's inflation report. In Wednesday's report, the BoE said its inflation target of two per cent will likely be overshot if it loosens monetary policy as aggressively as the market expects.

USD
The dollar fell to a one-week low against the euro following a warning from Federal Reserve chairman Ben Bernanke that the outlook for the US economy is deteriorating. He said the housing and credit market turmoil had hit the economy and added that a weak labour market could further undermine consumer spending. Given the risks facing the economy Bernanke signalled that additional US interest rate cuts were likely.

EUR
Perpetual concern about growth in the US together with mixed messages from the European Central Bank has helped the euro rally. According to the ECB's February monthly bulletin, the Central Bank is really not sure how much of an impact that turmoil in the financial markets will have on the real economy. Elsewhere, UBS reported $13.7 billion in write-downs, the biggest loss by a bank in the fourth quarter, making a rate hike from the bank very unlikely.

JPY
The Bank of Japan will be making its interest rate decision and is not expected to raise interest rates; an announcement that should be a non-event for the yen.