It was yet another tough day for the pound yesterday although, after channeling some stiff upper lip perchance, sterling did some ground.

The massive sell-offs we saw on Friday and Monday are now seen by many as slightly over reactionary to the actual threat posed by the Bank of England. It therefore follows that should we not see a hint towards further QE nor a protracted chat in the meeting over cutting the deposit rate for commercial banks then sterling could rebound violently.

Sterling gained by about 0.6% against the euro and around 1% against the greenback in otherwise thin trading yesterday. With the Bank of England minutes and the Fed meeting today followed by the G20 meeting speculators have been biding their time and we expect the next few days to be volatile.

News from the Federal Reserve should be fairly sensible tonight i.e. that they will not change interest rates and will speak of a continued vigilance needed over the US economy as a whole.

Good news for the guys down under: the recession is technically over in New Zealand. GDP was released at 0.1% last night for the June quarter. This pushed NZD to new yearly highs against most of its crosses. Hopefully the UK can follow this quarter.

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