A reduction in aggressive short positioning should continue to provide some short-term Sterling support with a buying interest on dips towards 1.40 against the US dollar.

Sterling maintained a firmer tone on Wednesday with the trade-weighted index rising to a one-week high. The UK currency pushed to highs above 1.43 against the dollar and made some headway against the Euro with a peak close to 0.92.

There were reported comments from fund manager George Soros that selling Sterling offered little value below 1.40 against the dollar which triggered a further covering of short positions. The currency also gained some support from a rally in European bourses.

The underlying economic fears were still important and the IMF warned that the UK economy was liable to contract around 3.0% in 2009. Fears that the UK will under-perform the global economy will continue to be a negative factor for Sterling and it retreated to below 1.42 following the FOMC decision. Sterling also drifted weaker again on Thursday while the Nationwide reported that house prices fell a further 1.3% in January to give a 16.6% annual decline. Sterling dipped to lows below 1.41 before recovering back to 1.43 in Europe with gains on the crosses.