Sterling has begun to recover yesterday's losses as risk appetite returns to the market

Risk activity eased off yesterday in the wake of falling stocks and a trade dispute between the US and China, quelling demand for the pound.

• Sterling retreated from one-week highs hit against the greenback as weaker equity markets spurred profit taking in riskier currencies and as investors braced for a raft of UK economic data later this week.
  
• UK shares initially slipped 0.7%, while European major indices fell a percent, cutting demand for currencies considered to be higher-risk.
  
• A trading row between China and the US also dented risk activities, though analysts say that this is unlikely to put a lasting hole in the market’s appetite in the longer term.
  
• Equities rallied slightly in the afternoon as the US markets came online, enabling the pound to recover some of its losses, and closing down at $1.6582.
  
• Inflation figures in the UK have just been released, and are better than expected, which should support demand for the pound as the economy appears to be recovering.