Global market conditions were slightly calmer on Tuesday with Sterling moving higher to highs around 2.0440 against the dollar as global equity markets stabilised. The 2.0250 - 2.0300 band against the dollar will be important as Sterling has consistently found support in this range during October. Any drop below this range would undermine confidence.

A sustained rise in risk aversion would tend to unsettle Sterling, especially as there will be an increased risk of investment outflows from the UK and a reduction in carry trades. There has been further speculation over a cut in UK interest rates despite the firm third-quarter GDP data released last week and this speculation has unsettled Sterling.

The CBI industrial survey recorded a significant deterioration with the October orders component weakening to -6 from +6 the previous month with business optimism at the lowest level for 20 months. The housing-sector evidence is likely to remain crucial over the next few weeks as a whole.