Sterling pared losses against the US dollar, in the wake of a positive report on factory trends from the Confederation of British Industry (CBI).

The American currency had gained, following the proposed extension of tax cuts by the Obama presidency, erasing some of the advance made by sterling after yesterday's improved manufacturing report. The CBI's December factory trends survey increased to -3 from -15 in November, a two-year high, and far ahead of the expected increase to -13. The data adds to yesterday's manufacturing report, and confirms that the UK's industrial sector continues to lead the economic recovery. In a particularly bullish report, the export order balance book hit +4 from -7 in November, reaching its highest level since August 1995. The CBI's chief economist, Ian McCafferty, said that the outlook was particularly encouraging, given the strong level of overseas demand. Sterling was also supported by comments from an economic think-tank, the National Institute for Economic and Social Research (NIESR), which said that its estimate of the UK economy's growth rate for the three months to the end of November was 0.6%, up from the 0.5% for the twelve weeks to 30 October. The NIESR added that the improvement weakened the case for more quantitative easing, as the economy is likely to be approaching a 'turning point', that means it is able to recover without the assistance of the Bank of England.