Sterling has taken another hammering with the break through the USD1.6110 technical support yesterday focusing the market's attention on the 1.550 area.  That said some support has been seen this morning with cable clawing its way back above the 1.600 level and EUR/GBP finding sellers ahead of the 0.9190.  There release of UK business investment data (-21.8% y/y) this morning has served to highlight the poor economic backdrop, but the pound continues to reel from yesterday's comments from Governor King that suggested he is unconcerned about sterling weakness.  Pressure is also stemming from the horrible budget deficit and continued speculation that the BoE may yet loosen monetary policy further.   While the BoE has left the door open for further easing there are some signs that the tone may be altering.  Remarks from the BoE's Chief economist Dale that pumping too much money into the system could create an asset bubble hint that the BoE may becoming more conscience of inflation potential.  The minutes of the Sep MPC also make note that the risk that CPI will fall below 1% had fallen from the publication of the Aug Inflation Report.  Sterling would find support from a change in tone from the BoE.  However, for now it seems likely that sterling will remain under pressure in the run up to the Oct MPC.

The USD retains its firmer tone vs the EUR this morning in tune with the weaker tone in equities and commodities prices.  The sharp fall in oil this week reflects the fact that inventories have been above their seasonal average for some time suggesting a misalignment between supply and demand that may pressure prices further into year end.  A similar story is being told by the soft tone of the Baltic Dry Index.  Having peaked for the year in June, the value of the index has since halved to a level which represents just 20% of its value in June 2008.  Poor demand for shipping points to lacklustre global economic activity which in turn echoes the warnings still evident in the rhetoric of most of the G-10 central banks that risks to growth still remain.   That said this week good Australian and NZ data has allowed these currencies to continue to push higher.  The AUD found further support this week in the RBA's report yesterday regarding the strength of its banks. 

Again today yen strength reflects falls in risk appetite in addition to speculation regarding repatriation ahead of the end of the fiscal half year.  Comments from the SNB's Jordon make clear the SNB will not be altering policy soon which reaffirms the risk of intervention.   EUR/CHF has headed higher this morning to the EUR/CHF1.5114 area. 

This afternoon, US durable goods data are due.  University of Michigan confidence and new home sales will also be released.