Daily currency report

The UK finally came out of a recession, but sterling was still under pressure as the growth was not as high as investors had originally thought. The dollar climbed higher against most of its major rivals, with the exception of the yen, while the euro retreated to recent range-bound trading levels during amid a shift to risk-averse assets as well as continuing concerns over the levels of debt of some eurozone member states.

Sterling

The UK economy emerged from the recession, however, recovery prospects are still decidedly uncertain. Q4's preliminary GDP figure of 0.1 per cent growth, although showing an improvement, was at a much slower pace than market anticipations of 0.4 per cent. Most analysts still predict the Bank of England will halt its £200 billion asset buying programme next month, but the GDP figures reinforced expectations that any interest rate would stay at the current record low.

US Dollar

The US dollar movements have been extremely volatile this week so far. The main driver has been safe haven inflows propelled by the tightening of policy in China. However, a weak bout of economic data and the apparent influx of carry trades have also helped cause a bit of turbulence.

Euro

The German IFO Business Survey saw a rise in to 95.8, which was above market forecasts. This helped to support the euro and the single currency also improved against sterling after disappointing UK GDP figures. However, the single currency was unable to hold on to its gains as doubts linger over the state of member state economies.

Japanese Yen

The Japanese yen continues to trade higher on the back of safe haven flows.