The impact on the currency markets has also been fairly predictable. Just like last year's turmoil, this shock has sent traders scurrying for the apparent safe haven of the US dollar and the Yen. Sterling slipped 4 cents against the dollar since yesterday but we have seen some rebound this afternoon as stock markets stabilised. Oil and gold also fell, partly as a reaction to the stronger dollar, but also because traders are taking their profits off the table in a general move towards de-risking portfolios.

The sterling/euro rate has been relatively unaffected as the main focus has been on a general move towards the dollar. In our last update we were positive on the short term prospects for the exchange rate, saying that as long as it continues to trade above 1.10 things were looking good. Since then the situation has deteriorated and we've seen a seven day losing streak that puts us right around that 1.10 level. That leaves sterling on a precarious slope unless it can manage a swift rebound from current levels. Below 1.10 the next likely support is 1.0825, and then 1.0630. Today's 12 month chart shows that it is still very much a matter for debate whether sterling has done enough to end the downtrend that dominated through 2007/2008. We saw an encouraging reaction in October, but the pound needs to develop that rebound further by taking out the recent 1.1320 high before we can safely target loftier levels like 1.1500 and 1.1730.