Sterling makes a slight recovery

Sterling recovered some of its losses yesterday as traders took profits after its recent slide.

The pound was undervalued – last week hitting a six and half year low against the Dollar and a record low against the Euro – by signals from Bank of England that it was  prepared to cut interest rates aggressively to fend off a steepening downturn in the UK economy.

The bearish backdrop of the UK economy continues to cast a dark shadow on the pound as its struggling to break into the 1.51 range. Overall, the GBP/USD traded with a low of 1.4661 and a high of 1.5000 in the New York session.

The Euro was generally well supported during the Asian and European sessions, extending these gains as US stocks turned positive. The late Dow sell off pared gains but the pair was still well supported at 1.2650. EUR/GBP was one pair that gave up a lot of ground as the market bought the beaten down pound.

The US dollar eased after posting strong gains last week as data showed US manufacturing activity fell sharply. Ongoing Economic concerns and fears of a deep recession lead to a late sell off and Dollar losses were pared. Supporting the USD was ongoing commodity weakness.