Daily currency report

The data releases from both the UK and US suggest that the recession that is upon us may become the worst in decades and raises the risk that deflation, or a prolonged decline in prices, will be another serious hazard facing the Bank of England and Federal Reserve.

Sterling (GBP)

The sterling continued to gain against both the euro and US dollar, however inflation data and comments from Bank of England committee members pushed the currency lower by the end of trading. The Consumer Price Index revealed that inflation fell for the first time in over a year to 4.50 per cent from September's 5.2 per cent. This has given scope for the Bank of England to cut rates from the current 54-year low of three per cent.

US Dollar (USD)

The greenback remained locked in recent trading ranges in spite of yet more record data that underlined the parlous state of the world's largest economy. A government report showed producer prices fell by 2.8 per cent in October - most probably as a result of tumbling energy prices.

Euro (EUR)

The single currency was fairly stable against the dollar but reversed some of the previous day's losses against the pound as little data was released from the eurozone. Jean-Claude Trichet, stated in an interview with Sky News that "The global financial crisis marks the first time since World War II that the heart of the finances of the industrial world has been at stake".

Japanese Yen (JPY)

The yen remains well supported even though Japan's number three bank, Sumitomo Mitsui Financial group, joined larger rivals seeking to raise funds to counter bad loans. The news only served to deepen the sense of economic gloom in Asia as markets fretted over the fate of the sinking US car industry.