A ray of light for sterling?

David Lamb at No1 Currency: This week has seen pound pull away from multi year lows against the US$ as a degree of risk appetite has returned to financial markets.

The shift in risk sentiment has stemmed from the move closer to setting up a ‘toxic bank’ in the States which would theoretically boost confidence in the global financial system and ultimately kick start a freeing up in credit markets.

Traditional safe haven and currencies such as the Japanese yen and US dollar have given up close to 50% of this year’s gains on sterling during the course of the last few days.

With much of the bad news for UK economy now built into the market and some of this negative sentiment now being aimed at the Eurozone, sterling now has an opportunity to build a medium term base provided risk appetite remains intact.