Little movement on cable

Sterling gained a little ground against the US dollar yesterday, helped by rising stock markets and the British government’s plan to insure against toxic assets for banks. The scheme, which is designed to remove uncertainties about the banks’ capital positions and enable them to focus on lending to customers again, could end up with the government insuring around £500bn in toxic assets held by UK banks. The news helped push shares higher, with the UK's FTSE 100 index rising by 2.2 percent, bolstering demand for riskier currencies such as the pound.

Data released in the US yesterday afternoon showed initial jobless claims reached a 26-year high, while sales of new homes fell 10.2% in January, to the lowest level since 1963. Figures also showed that durable goods orders were down 5.2% last month, and equity markets began to fall again following these releases, dragging the pound lower against the dollar.

There are several announcements taking place in the US today, including Gross Domestic Product and Real Personal Consumption Expenditures at 13.30 GMT. The dollar has continued to strengthen back over the pound this morning as investors are apprehensive about the release of this data.

GBPUSD: 1 week chart. Click on graph to enlarge.