STERLING has fallen back as the deutschmark takes on renewed strength on the European markets.

As dealers await the outcome of today's meeting between the governor of the Bank of England, Mr Eddie George and the British Chancellor of the Exchequer, Mr Kenneth Clarke, the weakness of the British currency led to a small rise in the value of the pound to 100.9p sterling.

While no interest rate change is expected after today's meeting, investors will nervously await the outcome with the Bank of England possibly increasing pressure on Mr Clarke to increase interest rates in the months ahead.

In common with other currencies, the pound lost ground against the deutschmark, falling almost a pfennig to DM2.4530.

The mark gained from optimistic forecasts about the German economy and from speculation about the attitude the EU Commission will take to France's budgetary arithmetic.

The dollar showed a fairly muted reaction to the latest data from the United States but had earlier lost some of its shine after Germany's top economic institutes forecast healthy German economic activity and a possible rise in interest rates there.