THERE was limited market reaction to the growing perception that monetary union may not go ahead on time.

Sterling strengthened slightly [against the deutschmark after the Bundesbank announcement that it [was against German government plans to revalue its gold reserves.

It is also gaining slightly from the worries over the French general election, where the socialists look more likely to win a victory on Sunday.

News that the Governor of the Central Bank warned there was a possibility that the project may not go ahead on time is also likely to add to the uncertainty.

The pound fell against sterling, closing at 92.07p from 92.42p, however, it failed to follow sterling up against the deutschmark and closed at 2.5674 deutschmarks, down from 2.5684. At the same time, Irish and European bonds were sold as investors searched for a safe haven in the US and Switzerland.

Analysts said sterling benefited from the uncertainty to a lesser extent than many would have expected until recently.

"People tend to use sterling in this light, but it is less applicable with a Labour government than sterling with a eurosceptic government," said Mr Paul Meggyesi, senior currency analyst at Deutsche Morgan Grenfell.

The German government has said it would press ahead with the revaluation regardless. However, it must still pass the reforms through parliament and must be granted approval by Eurostat, the European Commission's accountancy arm.

Mr Dermot O'Brien, chief economist at NCB Stockbrokers, said there was "little in the way or principle" involved.

The Bundesbank had no objection in principle to the proceeds of the sale being applied to a reduction in government debt, he said. "Its objections are purely about the timing of the operation."

The German government wants to do it in stages, between 1997 and 1998, while the Bundesbank wants nothing done before 1999.