Weak US data and concerns about Citibank and Bank of American sent US stocks lower at the start of the session which helped the Dollar to strengthen.
Also adding momentum to the move higher in the Greenback was Thursday's decision by the US senate to release 350 billion USD from the TARP fund to Treasury with money already allocated to help Bank of America and Citicorp.
With no UK data releases on Friday the Pound Sterling took direction from equity markets and further developments within the banking sector. GBP/USD rallied from the London open of 1.4780 to post a high of 1.4980 in early U.S trade as positive sentiment returned. With Treasury holding talks over the weekend with High Street bank executives to discuss the possibility of more government assistance, major banking stocks fell during late trade in the UK.
The hardest hit was Barclays bank which shed 25% and was forced into making a statement that earnings are likely to be better than analyst forecasts. The Pound gave back its gains to retest and hold onto support back at 1.4650 before bouncing slightly near the close to 1.4730. In comments made over the weekend Prime Minister Brown demanded that the banks "come clean" and increase disclosure as to what bad debt they were holding in order for the market to regain trust.
The Euro found strength on the downbeat US data gaining across the board. EUR/JPY surged higher on decreased risk aversion. Helping support the Euro was reported comments from Trichet that he had no plans for a zero interest rate policy. Overall the EUR/USD traded with a low of 1.3110 and a high of 1.3345 before closing the day at 1.3180.