Renewed fears over the financial sector and weak economic data will maintain a lack of confidence in Sterling, although further selling should be contained at this stage.
Sterling was unable to sustain gains against the Euro on Friday and weakened back to around 0.7860 in US trading while the UK currency found support below 1.97 against the dollar during the day.
Sterling was unsettled in Asian trading on Monday by fears over the UK banking sector as the Bradford and Bingley chief executive was forced to leave office due to ill-health. There was also a major profits warning which helped trigger further speculation that the housing sector would continue to deteriorate.
The impact should be offset slightly by news of an overseas stake in the bank, but underlying Sterling sentiment remained generally weak with a lack of confidence in the domestic economy contributing to short-term selling pressure. Sterling weakened back beyond 0.79 against the Euro and also dipped sharply to lows near 1.96 against the dollar.
The shadow MPC committee, comprised of academics voted by an 8-1 margin for unchanged rates ahead of the official MPC interest rate decision this Thursday.
The UK data releases were also generally weak with the PMI index for the manufacturing sector weakening to 50.0 in May from 50.8 the previous month. The mortgage approvals data was at a record low while net consumer lending was also subdued.