Risk aversion and profit taking once again came into play on Friday as US economic data, whilst positive, was not quite as good as markets had anticipated. This, combined with disappointing retail sales data earlier in the week and the fact that US markets are closed today, was enough to tempt investors back into the relative safety of the greenback.

Adding momentum to the dollar’s rise were lingering concerns over the state of Greece’s fiscal deficit. The problem’s facing the Greek economy had come into focus on Thursday during ECB chief, Jean Claude Trichet’s press conference during which Trichet emphasised the need for Greece to balance its books. Greece has been particularly hard hit by the global economic slowdown, and has already had its sovereign debt rating downgraded. Whilst Greece is unlikely to be obliged to quit the euro, these concerns were enough to drive the euro lower on the exchanges with the US dollar and sterling benefitting the most.

In the absence of any key data released in the UK, the pound took its direction from trading in other currencies, ending the session higher against the euro, but slightly lower versus the US dollar. American markets are closed today for the Martin Luther King Day holiday, and consequently there is no significant market data up for released. Therefore currencies are likely to trade within recent ranges before the week begins in earnest tomorrow with the publication of core UK inflation data and the German ZEW index.