The latest consumer lending data will provide some Sterling relief and lessen immediate fears over a sharp downturn economic downturn, although the longer-term risk profile remains very high.

Sterling pushed to highs around 2.0570 against the dollar on Friday, but was unable to sustain the gains and weakened back to around 2.05. This reflected Sterling weakness rather than a dollar revival and the UK currency weakened back to test 2-year lows beyond the 0.70 level against the Euro. This pattern continued on Monday before Sterling found a firmer tone.

There has been further speculation that the Bank of England will move to cut interest rates which has undermined Sterling on the crosses. The latest Hometrack survey reported a 0.1% dip in house prices for October which slowed the annual increase to 4.4% from 5.0% while mortgage approvals also fell in September to a two-year low, Consumer lending, however, was stronger than expected which will ease immediate fears over a sharp slowdown in the consumer sector and will tend to curb any initial selling pressure on the UK currency.

The UK currency will also be influenced strongly by global risk conditions and there will be some net support if there are further stock market gains, especially if oil prices remain at record levels.