A string of recent weak US data and dovish comments from the Federal Reserve have strengthened expectations that interest rates will not rise further. Meanwhile, the European Central Bank still looks to be firmly on a path of monetary tightening and is expected to signal another rate hike in October at its press conference this morning.

The dollar remains stuck within a tight range, however, and the euro will not breach the 1.30 USD level until there is a clear sign that the next time the Federal Reserve adjusts interest rates it will be downwards not up.

Elsewhere, expectations that weak economic data and political pressure will prevent the Bank of Japan from raising interest rates any further weighed on the yen, with the euro making a sustained break of the 150 yen mark to reach a new record high of 150.32.

The prospect of continued very low borrowing costs in Japan have given a renewed boost to carry trades- when investors borrow in low-yielding currencies in order to invest in high-yielding currencies-, boosting high-yielders such as the Australian and New Zealand dollars and sterling.

Meanwhile, the pound was also strong, reaching 10-day highs against the dollar, after another set of firm UK data this morning strengthened expectations that the Bank of England will raise interest rates again this year, probably in November.

UK mortgage lending surged to its highest level in nearly three years in July, figures showed, while a key survey also revealed UK retail sales rising at their fastest rate in over a year and a half during August.

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