THE pound has continued to fail against sterling and has traded down to as low as with analysts believing the British currency could rise further in coming weeks.
Traders said there was a feeling in the market that sterling could move a lot higher against the deutschmark, which would send the pound even lower.
However, the sterling rise is expected to be very gradual.
The fall in the pound to below 103p sterling will prove a relief to Irish exporters selling to the British market, many of whom have complained about the pound/sterling exchange rate and its impact on their competitiveness.
Mr David Cocker, currency analyst at Chemical Bank in London, said sterling was gaining from a perception that it was outside the problems of EMU.
"The market believes' the governments may opt for a fudge of the Maastricht entry criteria," he said.
And that is negative for the D-mark and positive for sterling"
There is also a belief that Britain has a good chance of meeting the criteria and is therefore not likely to be involved in any fudge.
The European economy suffered, a major blow yesterday with news of a big increase in German unemployment taking it to record levels and casting yet another shadow over the timetable for a single currency.
Much of the increase was blamed on harsh winter weather but it a now clear that the general economic climate is clouding over fast.
Official figures released yesterday showed that unadjusted German unemployment had risen to 10.8 per cent of the workforce in January from 9.9 per cent in December, or by 368,000 people, to 4.159 million.
This increase above the highly significant mark of four million was the biggest ever monthly increase and took the total to the highest point since 1949, when Germany started keeping records and the so called German post second World War economic miracle began to gather speed.
These figures include a high degree of unemployment in the former East Germany which did not feature in the statistics until the 1990s.
Emphasising the continued downward trend in European interest rates, the Bank of France cut its intervention rate to 3.9 per cent from 4.05 per cent. It left the five to 10 day lending rate unchanged at 5.6 per cent, in a further bid to boost growth.
The figures on US applications for jobless benefits together with higher unemployment in Germany sustained the dollar," said Mr Trevor Laugharne, economist at the American Express Bank. The new applications were down by 21,000, to 368,000 for the week ending on February 3rd.
While sterling may rise for a period, in the longer term Mr Jim O'Leary, chief economist at Davy Stockbrokers, expects the pound to strengthen to around 104p.
"According to our analysis, the underlying upward movement of the pound is due to stronger growth in Ireland than Britain. This is, worth around 2p a year on the pound."
But, Mr O'Leary continued the movements in sterling against the mark also affect the pound "On average, every 10 pfennigs sterling gains, the pound loses 1p against sterling," he said.
Because he expects sterling to reach DM2.35 by the end, of the, year that should take 1p off the pound. As a result, he expects the pound to rise 1p altogether or move, to around 104p.
