Currency Solutions once again review the pound this week, for a free guide on 'How to control your currency as the market moves in 2010' and access to the daily newsletter reviewing the pound, euro, dollar and the other 'top movers' click here

Monday

The pound fell against the dollar as a YouGov Plc poll published in yesterday’s Sunday Times reinforced concern that the election will produce a government without a parliamentary majority.  Sterling also slipped for the first time in three days versus the euro on concern that the UK will have difficulty servicing its ballooning debt.

At 1011 GMT sterling traded at 1.5038 against the dollar and 1.0970 versus the euro.

London's FTSE index was down 0.2% in early trade and sterling fell nearly 0.5% against the yen as investors shied from riskier assets after Shanghai shares ended 1.2% lower.

As well as the Fed’s decision tomorrow, which will undoubtedly affect GBP/USD to a significant degree, the market will be looking to the minutes of the latest BoE meeting, due out on Wednesday, which are expected to show a decision to leave policy unchanged.

Tuesday

The pound fell at the European open on the draft, which suggested the Commission will tell Britain to do more to cut its deficit in the medium term.

At 0938 GMT, sterling had recovered to trade at USD1.5058, off earlier lows of USD1.4977 but was down slightly against the euro at 1.1005.

Analysts believe much of this weakness is already reflected in the value of the pound and therefore further downside potential for sterling should be limited in the near term.

Wednesday

The pound hit a two-week high of 1.5270 against the dollar in early trade ahead of the release of Bank of England policy meeting minutes.

Sterling began its rise yesterday when healthy UK housing data and political opinion polls triggered a round of short-covering which helped the pound recover from recent losses to climb more than 1% against the dollar.

Opinion polls showed that Britain's main opposition Conservatives are back on course to win the election, expected to happen in May.

At 0946 GMT the pound traded at 1.5210. It will be interesting to see whether or not UK currency can maintain this strength, as there is still caution in the air concerning the nation’s public finances and gigantic deficit.

Thursday

Wednesday’s data helped push the pound to a strong position this morning against a weakened euro but traders were cautious before today’s public finance figures. However, the data showed UK public finances deteriorated by less than economists had forecast in February, which kept the pound strong in the global currency exchange markets.

At 1000 GMT sterling traded at 1.1171 against the euro and 1.5275 versus the US dollar.

Good data has contributed to the view that the UK economy may be recovering better than previously thought, lessening the chances that the Bank of England will opt to expand asset purchases under its quantitative easing programme.

Friday

Andrew Sentance said that it must be recognised that “there is some risk of a double dip” with regard to the recession though he expected inflation in Britain to fall back to the central bank's 2% target, or below, helped by muted wage growth.

The pound was under pressure after failing to break above USD1.5330 yesterday and at 1005 GMT traded at USD1.5240. Against the euro, the pound fell 0.5% in early trading and at 1013 GMT traded at 1.1204.

For those looking to make a foreign exchange transfer today it would be worth monitoring any political developments as the prospect of a hung parliament still hampers sterling’s gains despite polls favoring the conservatives earlier this week.

Nigel Hodges www.currencysolutions.co.uk