Despite the pressure for a near-term correction, Sterling will remain vulnerable over the next few weeks.

Sterling weakened to fresh four-month lows against the dollar with a decline to around 1.9770 on Monday and again on Wednesday before a recovery. The UK currency was unable to make any impression on the Euro with a decline to record lows around 0.7310. Sterling secured limited relief on Thursday with pressure for at least a limited correction after recent sharp losses while fresh US currency vulnerability helping gains to 1.9900.

The anecdotal evidence on retail spending trends will be watched very closely in the short term and signs of strong initial buying in the sales period will provide some Sterling support, although the sales reports next week will be more important. Initial demand for high-yield currencies will also provide some UK currency support as carry trades enjoy near-term popularity.

Thursday's economic data will provide some degree of relief with BBA mortgage approvals rising to 44,800 in November from 44,300 the previous month while third-quarter equity withdrawal held above the GBP10.0bn level. Mortgage approvals still fell sharply from last year’s figure of 77,600 which suggests an important underlying slowdown in the sector with persistent fears that a housing deterioration will undermine the wider economy.