The sterling came under pressure overnight, falling to the lowest level in three weeks as comments from Moody’s that the UK could lose their AAA rating sent the cable skidding to a low of 1.6346.

The statement came after the European Commission had earlier said that the UK Government faces a ’challenge’ in implementing its planned budget-deficit reduction program, and that some of its growth forecasts are too optimistic. From 4pm (Melbourne Time) yesterday the cable is modestly weaker, down 27 pips to 1.6398 from 1.6425. From a technical perspective, the sterling remains range bound between 1.63 and 1.65, with the daily chart skewed in favour of the bulls; the market is continuing to consolidate sideways following the strong 1.60 – 1.65 move higher two weeks ago.

Looking ahead, it’s likely to be a busy night for traders as the UK trade balance is due at 6.30pm (Melbourne Time), along with the Bank of England interest rate decision and accompanying statement at 9pm (Melbourne Time). While the Central Bank looks almost certain to leave rates unchanged at record lows of 0.5%, traders will pour over the accompanying statement for any hawkish news or dovish clues.