Sterling rebounds from sharp fall

Sterling has regained some ground against the US dollar after a massive fall on Monday - the largest in percentage terms since 1992.

The pound recovered to $1.493, before slipping to $1.488, up half a cent against its close of $1.483 on Monday.

On Monday it fell 5.2% against the dollar as yet more bad economic data pointed towards a prolonged recession and further interest rate cuts.

Sterling was steady against the euro on Tuesday, unchanged at 1.174 euro.

The pound's fall on Monday was the largest since the sterling crashed out of the Exchange Rate Mechanism (ERM) in 1992.

"The environment of very weak sentiment regarding the domestic economic picture and potential rate cuts alongside equity volatility is keeping sterling very much on the defensive," said Jeremy Stretch, strategist at Rabobank.

On Tuesday the pound also hit a 13-year low against the Japanese yen, at 137.14.

Sterling woes

Figures showed that house prices in Britain fell to their lowest level in three years, while manufacturing output was contracting at a record pace.

The poor economic data increases the likelihood that the Bank of England will cut interest rates sharply on Thursday.

Lower interest rates make it less attractive to hold sterling.