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Short-term bounce in sterling is welcome

Despite rumours that Mervyn King had been visiting Scandinavia to talk with central banks in the region regarding a potential charge on funds held on behalf of UK banks, with the Bank of England, it appears that these initial reports may well have been wide of the mark. The Bank of England has today suggested there are no immediate plans to change the commercial rate of interest which banks are paid for money held on their behalf by the Bank of England.

As a consequence of this confirmation of the current situation, the currency market was today more favourable for sterling although only a small percentage of the recent drop was made up. Many eyes are fixed upon the worldwide currency markets and in particular the strength of sterling which has come under significant pressure over the last few days. There appears to be some confusion with regards to the stance of the Bank of England on a number of issues and while one issue was resolved today there are still many outstanding.

Mervyn King has been blamed by many newspapers for his flip-flopping between different ideas and different strategies for the UK economy and his recent comments have attracted nothing but confusion.

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