Sterling will remain volatile in the short term with the potential for a very fragile correction from recent over-sold conditions.

Sterling found support close to the 0.98 level against the Euro on Wednesday and secured sharp gains over the day with a peak below 0.95. The UK currency also pushed to a high near 1.47 against the dollar, but was subjected to very heavy volatility in US trading as positioning dominated markets and Sterling failed to hold the best levels.

The UK currency retained a firmer tone against the Euro on Friday, although it was unable to sustain a move above the 1.47 level against the dollar and dipped back towards 1.45.

The PMI index for the manufacturing sector edged higher to 34.9 from 34.5 previously which was above expectations, but mortgage approvals were weaker than expected at multi-year lows. The latest Bank of England credit conditions survey also reported a further tightening in lending standards which will maintain pressure for further Bank of England interest rate cuts.