Sterling is proving resilient at present, but remains at risk of fresh selling pressure as the economy deteriorates.
The latest UK RICS house-price survey weakened to -40.6% in November from a revised -23.4% previously and was the weakest outcome since 1998 while confidence in the housing sector continued to deteriorate.
The housing data will reinforce fears over the UK housing sector. Elsewhere, the CBI industrial orders survey weakened to +2 in November from +8 previously while the prices index also edged lower for the month
The global central bank efforts to improve liquidity will have a short-term impact on market interest rates with the Libor rates easing on Thursday. The reduction in stresses will lessen the risk that the Bank of England will be forced into an emergency rate cut to prevent a rapid deterioration in the market.
Nevertheless, underlying confidence in the UK economy is liable to deteriorate over the next few weeks with expectations of an early-2008 rate cut.