By Nigel Hodges of Currency Solutions

Happy New Year!

Amongst the celebrations and fireworks, the hangovers and pledges of a better lifestyle, the Bank of England has attempted to resuscitate the national economy by lowering interest rates to 1.5% this week.

The New Year has brought a change of fortune for the Pound. After touching on a record low of 1.02 against the Euro on New Years Day, Sterling has rallied back to 1.11. Even the reduction of interest rates, to the lowest level in the Bank of England's history, didn't dampen support for Sterling as markets appeared to focus on the long-term view.

Although the move was largely expected and priced into markets, the Bank's decision marked a positive turn for investor sentiment regarding Sterling this week. This is not due to any strengthening of the UK situation, but rather due to it getting worse elsewhere. Although we have seen further contraction in the UK manufacturing and industrial sectors this week, this has been largely discounted by markets as they focus on bigger news from the US and Eurozone.