·         GBP doesn’t make new lows against dollar or euro

·         Lib Dems “We will not be divisive”

·         Aussie GDP 0.9% vs 0.7% exp

·         Prudential deal may be creaking

·         UK consumer confidence hits 2 year high

All this and more is available on our blog. Click here  http://www.worldfirst.com/blog

After the havoc of Monday’s markets yesterday was always going to be a critical day for the pound; would the market once again mount an attack or would they allow the pound some breathing room?

Sterling was under pressure all day yesterday trading within the 1.10s against the euro and the 1.49 – 1.5050 range against the dollar. Bets against the pound are still at a record high; I would be lying if I said I didn’t think they would increase in the coming week as well.

News from politics corner has indicated that Nick Clegg, leader of the Lib Dems, will not use a hung parliament as a divisive circumstance with which to call another general election. In an interview in today’s FT he argues that his party will act as “guarantors of fiscal responsibility”. This may have caused the slight sterling pop up overnight although this looks to have petered out this morning.

In other news, Australian GDP was released at 0.9% overnight; ahead of expectations. This hasn’t caused too much reaction in the AUD however, as part of the RBA’s statement when announcing their most recent rate hike was that they have raised the threshold of GDP which would trigger a rate rise. This looks to be 3% on a YoY figure (currently 2.7%).

While equity markets continue to move higher it looks like the inverse relationship between them and the dollar has broken down. It used to be the case that equity markets up, dollar down and vice versa but it looks like this correlation is slipping. This is being put down to shifts in the LIBOR rates for USD and JPY (the other main haven currency) and what is seen as best for carry players.

In the past couple of minutes we have begun to hear that the Prudential deal to buy AIA may already be creaking. This was put down as a major reason for sterling weakness on Monday; a failure may see a reversal in the pound’s recent fortunes.

Apart from that Aussie GDP figure we have already seen some data today. UK Consumer Confidence has risen to its highest level in 2 years with respondents citing the exit from recession as a reason for increased joy. We also have the important PMI from the UK services sector (09.30), its European counterpart (09.00), European Retail Sales (10.00), US ADP unemployment (14.15) and US Non-Manufacturing ISM (15.00).