Sterling started this week at its weakest level against the US dollar in nearly five years and the euro was close to a 12-year low.
The general impression is that the dollar is girding its loins for a resumption of the uptrend that took it steadily higher from July last year until it ground to a halt a month ago. However, the first condition to be met before that can happen is a convincing break of March's euro low, which will not necessarily be easy to achieve.
Another requirement is that the US economy will have to start delivering punchy economic data once again. Last week's purchasing managers' index readings managed to do that but there was nothing to back them up.
Decent figures this week for retail sales and industrial production would help the dollar's case, as would an inflation figure on Friday that is not below zero.
If the dollar were to break higher it would, in theory, have positive implications for sterling against the euro. However, with the UK general election less than four weeks away, the pound is feeling the heat of political risk as the opinion polls continue to indicate another coalition government of uncertain colour.
Sterling is in a similar situation to the one ahead of the Scottish referendum last September. Back then, the pound's problems were solved when the polls began to point to a clear result. It might not be so lucky this time around.
A more immediate threat is this week's UK ecostats. The consumer price index data on Tuesday are expected to put inflation at zero per cent for second month and Friday's employment figures will almost certainly show a continued fall in the number of jobseekers. Any unpleasant surprises could be expensive for sterling.
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