Sterling briefly rallied against the euro and the dollar on Wednesday after UK finance minister Alistair Darling said there will be no windfall tax on bank profits. Darling's announcement came in his UK pre-budget report. Sterling briefly hit a high for the session of $1.6377 after the news, while the euro fell as low as 90.03 pence.
By 1312 GMT, sterling had pulled back some of those gains to trade at $1.6321 against the dollar, up 0.2 percent on the day, while the euro was at 90.43 pence, up 0.2 percent. In the midday trade, sterling fell against the euro on Wednesday as nervous investors awaited UK finance minister Alistair Darling's pre-budget report and jitters mounted about UK fiscal health.
Against a broadly weaker dollar, sterling recovered from an earlier near two-month low below $1.62, but it remained weak and analysts and traders believe it could resume losses if Darling does not present a credible plan to cut the UK's budget deficit. At 1131 GMT, the euro was up 0.1 percent at 90.28 pence, while sterling fell 0.2 percent against the yen to 143.61 yen. Against the dollar, sterling rose 0.3 percent to $1.6327, having earlier hit a near eight-week low of $1.6167.