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Sterling has managed to erase most of the losses suffered earlier in the day, thanks to a resurgence of risk appetite arising from optimism that the meeting of Nicholas Sarkozy and Angela Merkel will provide a starting point from which the eurozone can construct a meaningful response to the current iteration of the Greek debt crisis.
Indeed, Chancellor Merkel has signalled an easing of the previously inflexible German position. Berlin appears to have given way in the face of French and ECB opposition, agreeing that private creditors should be allowed to voluntarily roll over their Greek debt holdings. Sterling has encountered strong support in the $1.61 area, and buying at this level combined with increased optimism about Europe may help the currency to rebound from here. The Michigan consumer index reading will also be important, as a better-than-expected reading (which admittedly looks like a rather unlikely prospect) will provide the bulls with some much-needed succour.
