Sterling falls to a nine-month low against the dollar and struggles versus the euro.

Pound Sterling – UK Markets

The pound has been dented by concerns of an extension to QE and as a result was down as much as 0.6% in early trading, hitting a nine-month low of USD1.5279. BoE Governor Mervyn King said earlier this week that further quantitative easing may be needed, which was then echoed on Wednesday by Monetary Policy Committee member Adam Posen, piling further pressure on the pound, which, at 1112 GMT traded at USD1.5329 and EUR1.1377. The market is currently watching the Confederation of British Industry's latest distributive trades survey for more insight into how the retail sector is faring after weak official UK retail sales data last week. However, the one to watch will be Friday's revised UK fourth quarter gross domestic product data, which is sure to cause ripples in the market.

US Dollar – US Markets

The greenback remained under selling pressure on expectations that US interest rates will stay at low levels for some time, following comments by Federal Reserve chief Ben Bernanke yesterday. Restrained consumer spending and home sales underscore Federal Reserve Chairman Ben S. Bernanke’s comments yesterday that the recovery is “nascent” and still requires interest rates near zero. The Fed chairman, who continues his semiannual testimony today, said slack labor markets and low inflation would allow the Fed to keep the benchmark lending rate low “for an extended period.” Euro concerns, however, are still buoying the greenback and it continues to make gains against GBP and EUR. At 1113 GMT the dollar traded at EUR0.7422. Today, the most important economic indicators scheduled to be released from the US are the Unemployment Claims and Durable Goods Orders at 1330 GMT. Traders have also been advised to follow Ben Bernanke's testimony expected around 1400 GMT which could impact the dollar's volatility in later trading.

Euro – European Markets

The euro has dropped to a one-year low against the yen amid concern that Greece’s credit rating will be lowered as it struggles to push through fiscal cuts demanded by the EU. Europe’s single currency fell toward a nine-month low against the dollar as Greece faces further downgrades as early as next month as it copes with the EU’s biggest budget deficit. The yen advanced against all 16 major counterparts as investors sought what they consider safer currencies after unions took to the streets of Athens where police clashed with demonstrators. Despite this, the uncertainty over sterling has still allowed the euro to make further gains and the pair currently trades at 0.8822.

Other Currencies – Highlights

Investors are hedging bets that political turmoil will weaken Turkey’s lira more than any other currency as the arrest of army officers over an alleged coup plot raises tension between the government and the military. The lira has depreciated 2.1% against the dollar this week and traded 0.04% weaker at 1.5452 in earlier trading in Istanbul.