Sterling has reversed yesterday's losses against the dollar, gaining a cent in trading this morning

On the Labor Day holiday, the pound fell back to $1.6347 against the greenback despite a general rise in risk sentiment.

• The pound initially edged up further against the dollar yesterday as risk sentiment was supported by gains in the European equity markets.
  
• The G20 ministers over the weekend pledged to maintain monetary stimulus which, although this came as no surprise, it was nonetheless supportive of risk and generated a rally in the European equity markets.
  
• Gains were short-lived, however, as speculation of further easing by the Bank of England later this week prevented the pound capitalising on the rise in risk sentiment.
  
• Analysts noted that trading was choppy yesterday due to merger and acquisition speculation after Cadbury rejected a £10.2 billion take-over bid by US conglomerate Kraft Foods.
  
• Sterling however has reversed its losses this morning, already creeping up near the 1.64 level, as investors speculate on positive British manufacturing production data released today at 09:30BST.