Sterling relinquished strong gains vs euro yesterday as risk appetite eased

The British currency, unable to capitalise on strong early gains, lost ground against the euro yesterday, as an easing of risk appetite wore heavily on the fragile pound.

• Initially, sterling extended Tuesday’s rebound following a surprising jump in UK consumer sentiment, posting its biggest monthly boost in more than 14 years and signalling growing optimism about the UK economy.
  
• Additionally, the pound found support from signals that the Bank of England may not cut its bank reserves deposit rate anytime soon.
  
• In the afternoon however the pound gave up its gains, as weak US data brushed off on equity markets and sent the pound back down to a close of 1.0915.
  
• In trading this morning though, the single currency has slipped back on speculation that finance ministers and central bankers will discuss the euro’s strength at a G7 meeting later this week.
  
• Manufacturing data is due in the UK today at 09:30, with forecasts predicting a return to expansion in the industry, which may offer the pound some support.