The pound dropped back against the US dollar today, back towards levels seen at the end of December, with investors concentrating on the eurozone and its problems due to the lack of British economic data today.

While the pound might do well against the euro given the problems on the continent, the outlook for the British economy remains as worrying as ever and with a Bank of England meeting scheduled for this week, there is little for sterling bulls to get excited about. Interest rates are likely to remain on hold, and while no increase to QE2 is forecast, the bank is likely to remain somewhat downbeat on the prospects for the UK. Rebounds against the US dollar will probably be somewhat brief, especially given the current improvement in US data as exemplified by last week’s non-farm payrolls report for December.