Domestic fears will limit the Sterling benefit from improved risk conditions

The UK currency has proved generally resilient over the past 24 hours with support close to 0.79 against the Euro despite generally disappointing data releases.

The UK PMI index for the services dipped to 52.1 in March from 54.0 previously which suggests a significant slowdown in the economy. The latest quarterly Bank of England survey also warned over a further tightening of credit conditions while corporate failures had increased.

Underlying fears over the housing sector and wider economy will continue to undermine confidence in the UK currency, especially as there will be additional pressure on the Bank of England to cut interest rates next week.

Sterling will gain some support if conditions within financial markets continue to improve. The serious reservations over the UK economic conditions will limit the potential for Sterling gains even if overall global risk tolerances remain higher.