Apart from 15 minutes in the afternoon when the Cheltenham Gold Cup made it impossible to find a dealer at his desk in London, the pound and other currencies were under pressure. The trigger was the Bundesbank's announcement that it would not reduce interest rates.
For over a week, Hans Tietmeyer, Bundesbank president, had been teasing the currency markets with the hope of a rate cut.
Dashing these hopes compounded the impact of the Chancellor of the Exchequer's admission on Wednesday that it would take "at least a couple more years" for confidence to return. He reinforced the impression there will be no rise in UK base rates in the near future.
Figures out yesterday led analysts to the same conclusion about US interest rates. Consumer prices rose 0.3 per cent last month, taking the annual rise to 2.9 per cent. The "core" increase, excluding food and energy, was also 0.3 per cent, lower than the previous month.
Housing starts in the US fell unexpectedly by 2.6 per cent in February, after a 12 per cent fall the previous month. They are at their lowest level for a year.
Although this week also brought evidence that US manufacturing industry is still expanding fast, the Wall Street consensus is that the Federal Reserve will not raise interest rates at its policy meeting on 28 March. Wayne Angell, former Fed governor and now at Bear Stearns, said: "I would not be looking for a move."
This view helped the Dow Jones industrial index add 30 points to 4,069 by the close. The FT-SE 100 index closed 47.1 points higher at 3,094.1.
The struggling pound and dollar later recovered against the mark, with sterling closing at DM2.22 in London.
The Italian lira advanced against the mark after a vote of confidence in the government.Reuse content