US dollar recovers some ground (page 3 of 3)

Sterling continued to under perform as markets persisted with their negative reaction to the UK's role in the Gulf as analysts said that the UK economy could slow down faster than its European counterparts.

As investors increasingly started focusing on Britain's economic outlook, sterling took a "Wild Wadi" ride down as it hit a fresh 3 ½ year low against the euro and a 7-week low against the greenback respectively.

Meanwhile, Britain's entry into the euro zone continued to percolate on the back burner with Prime Minister Blair dismissing speculation that he was poised to rule out a referendum on joining the single currency.

Blair's statement followed a Financial Times publication of a survey that showed Britain stood to lose substantial sums of investment if it delayed euro zone entry. News that Britain and the US were planning a fresh UN resolution for military action renewed pressure on the pound taking it down towards key chart level of 1.5800.

Data which showed a larger than expected fall of 1 pct in UK January retail sales proved to be the final nail in the coffin, as the pound dipped to its lowest level in nearly 4 years against the euro.

Sterling will face a firm test next week as the release of a second estimate of fourth quarter GDP and UK consumer confidence will be scrutinised closely by investors for further insight into the state of the British economy.

Range for the week: $ 1.5650 - $ 1.6000.