Sterling will gain some further support form a reduction in short positions, but he economic outlook will limit gains

The UK currency found support on dips during Monday with support close to 1.99 against the dollar and 0.7940 against the Euro with the currency still proving to be resilient.

The latest Nationwide house-price index recorded a further 0.9% decline in prices for June to give a 6.3% annual decline, although this was marginally stronger than expected. The data will maintain fears over the UK housing sector and economy as a whole which will curb short-term currency support.

The PMI index for the manufacturing sector weakened sharply to 45.8 in June from a revised 49.5 the previous month which was the weakest reading sine 2001 and will increase fears over the UK economic trends. The UK currency dipped weaker following the data after a strong start in Europe, but again proved to be resilient with a renewed push towards the 2.00 level against the dollar.