Daily Currency Report

The sterling hit a two-week high against the US dollar on the back of improved risk appetite and upbeat manufacturing data. However, concerns about the outlook for the UK economy saw the pound ultimately lose ground against most currencies. Improved US data and comments from one Federal Reserve member prompted investors to continue using the dollar as a funding currency for carry trades and advances into riskier assets. This saw the greenback fall although lingering worries kept investors away from the pound and the dollar was able to recover from two-week lows. Eurozone PMI data was in line with expectations and had little effect on the euro. Instead the single currency strengthened against the dollar and pound sterling as a result of improved risk appetitive.

Sterling

The sterling initially rose against a basket of currencies on the release of better than expected economic data. However, the early gains were reversed as investors became wary of the outlook for the pound, especially ahead of this week's Bank of England policy meeting.

US Dollar

The dollar come under pressure from various currencies as growing hopes for a global economic recovery encouraged investors to shift funds to riskier assets from the greenback. Comments made by a member of the Federal Reserve backed these concerns.

Euro

Figures released were at last in line with expectations and helped support the view that manufacturing recovery is underway in the eurozone. Manufacturing PMI for the eurozone in December came in at the expected level of 51.6. Germany, France and Italy's PMI components were all also in line with market predictions.

Japanese Yen

The Japanese yen made strong gains against the US dollar in the early morning session despite the lack of economic data released. These dollar losses were triggered by stop-loss orders being fulfilled which was attributed to profit taking by market participants.