Sterling should be able to secure a further corrective recovery against the dollar, although resistance levels will be tough on a move back to 2.03 with volatility remaining high

Sterling was holding just below 2.02 against the dollar in early Europe on Monday as the housing fears curbed recovery attempts. Sterling subsequently dipped to lows near 2.01 before bouncing to 2.0180

The Rightmove organisation recorded that there was a sharp 3.2% decline in house prices for December which will maintain fears over a sustained downturn, although with some caution as activity is low during December and the index also measures asking prices rather than realised prices.

The UK retail sales and consumer inflation data, together with the MPC minutes from December’s meeting, will be watched very closely this week. The tone of these reports will be very important for near-term interest rate expectations and the possibility of back-to-back rate cuts.