Sterling fell dramatically against a much stronger euro yesterday as France and Germany announced a new plan to recapitalise European banks. Sterling made gains against the US dollar as a fresh wave of risk appetite saw investors reverse ‘safe haven’ positions in the US dollar. The lack of UK data meant that sterling’s moves were largely driven by swings in risk appetite. Sterling seems to have recovered from the knee jerk reaction to the additional £75bn Quantitative Easing that was announced last week as many analysts realise that the pre-emptive move by the Bank of England is actually quite positive. Out today we have key manufacturing production figures so call in now for a live exchange rate.

In the euro zone, the news of the pledge by the French and German leaders Nicolas Sarkozy and Angela Merkel was met with relief by many, seeing the euro strengthen by 1.5% against sterling and testing recent sterling lows. Whilst many hope the single currency to cling on, sentiment remains very fragile as European leaders have disappointed many times before. The most cynical of analysts will point to the fact that no concrete detail has been outlined. ECB president Trichet is speaking later today so call in now for a live exchange rate.

In the USA, stock markets rallied on optimism over a potential deal for Europe and the US dollar fell as investors moved out of ‘safe haven’ investments into other ‘riskier’ currencies. It is a relatively quiet day on the data front so call in now for a live exchange rate.

Elsewhere, Japan’s ruling party policy chief said Japanese yen selling and intervention was needed to counter an extreme appreciation of the yen. The Japanese yen has been considered a ‘safe haven’ currency and has seen huge appreciation over the last few months. Call in now for an exchange rate.

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