Political drama and a fair amount of snow have made for a chaotic week and the market has been just as animated with the pound anxiously stuttering as a result of the Governments latest bout of turbulence.

The US dollar started brightly on Monday, recording early gains against the pound and the euro, but then later dipped as sterling pulled back. By Tuesday, the pound was still under pressure as jitters surrounding the UK economy reverberated through the market. This allowed the euro to hit a high against sterling, which then settled having risen 0.3%.

Rumors of large-scale repatriation by Japanese exporters pushed the yen higher against US currency, this weighed on the greenback as it struggled against the majors later on Tuesday. The following day wasn’t much brighter for the dollar and the yen, as negative data saw investors turning away from riskier assets.

The pound was dealt a swift blow on Thursday as Prime Minister Gordon Brown fought off an attempt within his party to unseat him. It wasn’t just the Prime Minister who was feeling the heat, as political uncertainty pushed sterling down to one-week lows against the dollar and the euro. However, these worries did ease and the next day the pound made a swift recovery, gaining 0.5% against the dollar.

Meanwhile the euro slipped whilst the dollar also failed to live up to expectations of further rallying at the start of the year as investors awaited US non-farm payroll data.

The Australian dollar went on to touch 1.73 against the pound, the strongest in 25 years, and traded up 0.5% at 1.73 as retail sales climbed 1.4% from October. Since the dollar’s aggressive December rally came to a halt, its progress has been limited and that continued to be the case.

So there’s much to ponder for the week ahead, with UK retail sales output data due later this week and the pound under pressure due to worries about the country’s economy.

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