Sterling was flat against the dollar and the euro this morning but further weakness is expected as analysts believe this pause in sell is only temporary.

Pound Sterling – UK Markets

Sterling managed a slight recovery from its lows yesterday but many believe this could well be a period of calm between storms as political and fiscal pressures continue to burden UK currency. At 0903 GMT, sterling traded close to flat against the dollar at 1.4977 and has since moved down slightly to 1.4961 at the time of writing. Euro/sterling was unchanged in early trading at 91.10 pence, off Wednesday's high of 91.30. Adding to the negativity was concern over Britain's sovereign ratings after Fitch Ratings highlighted on Tuesday the country's deteriorating credit profile. On Wednesday Prime Minister Gordon Brown said he believed Britain would maintain its coveted top credit rating also saying that economic recovery remained fragile and to change course now would risk plunging Britain back into recession. Later today the British Consumer Inflation Expectation Report may cause some ripples in sterling’s waters.

US Dollar – US Markets

After yesterday's downturn for the dollar, US currency will try and recoup some of its losses with the aid of several critical economic indicators due today. At 0958 GMT the dollar traded at GBP0.6684 and EUR1.0971. Both the US Trade Balance Report and this week's unemployment claims will be likely to have an impact on dollar positions. Whether or not they can provide the greenback with the necessary momentum to reverse its current direction remains to be seen.

Euro – European Markets

Comments yesterday from European officials regarding Greece gave the impression that the current debt crisis may finally be coming to an end. With risk taking apparently on the rise, the euro has been capitalising on the global economic climate and maintaining its gains against its major rivals. The euro was bullish throughout the day yesterday, and faired particularly well against the yen, up over 100 pips from this time yesterday. This morning at 1002 GMT the single currency traded at 1.3636 against the dollar. Although there isn’t much news for the euro today, movements elsewhere will have an effect. The British Consumer Inflation Expectation Report as well as the Swiss short-term interest rate report will likely lead to volatility for both the EUR/GBP and EUR/CHF pairs.

Other Currencies – Highlights

New Zealand’s dollar fell against all but one of its 16 major counterparts after Reserve Bank Governor Alan Bollard kept the nation’s benchmark interest rate at a record low and said weak consumer spending and higher bank-funding costs are delaying the recovery.