Having made broad gains, the dollar slipped back on more positive US data

Sterling pulled back over a cent and a half from a two-week low of $1.6264 hit against the dollar yesterday morning, to close the day marginally up at $1.6427.

• Initially, the pound fell sharply after the UK Treasury announced a shake-up of British banks and as investors braced for a possible extension of asset purchases by the Bank of England this week.
  
• Britain's two largest retail lenders, the part-nationalised Royal Bank of Scotland and Lloyds Banking Group will between them sell off businesses equating to 10% of the UK retail banking market to appease EU competition concerns.
  
• The shake-up highlighted the fragility of the financial sector, which is a key part of the UK economy, and added to concerns about the country's public finances.
  
• However, the pound staged a slight rally in the later session as data revealed that US factory orders increased by 0.9% in September, the fifth increase in the last six months, which supported rising optimism for the US economic recovery.
  
• Analysts also suspect that traders decided to sell out of the dollar rally in the later session with investors now eyeing the Federal Reserve's interest rate statement at 19:00 this evening.