The pound continued to gain against sterling and the dollar as both currencies slipped yesterday.

The pound closed at 88.5p against sterling in late trade from 87.68p a day earlier and at $1.4850 from $1.4699. Mr Pat O'Sullivan, economist at AIB, said it was now heading to 89p and would reach 90p.

The currencies fell back as US President Bill Clinton and Bank of England governor, Mr Eddie George, made it clear they would cut interest rates if the global situation demands it. However, Mr Jim Power, chief economist at Bank of Ireland, pointed out that there was a difference of opinion between the US and Germany.

"The US and the UK are both prepared to go along with a co-ordinated strategy but the Bundesbank president, Mr Hans Tietmeyer, has insisted that Germany does not need lower rates. That means we are unlikely to have rates below the current German cash rates of 3.3 per cent," he added.

Mr Tietmeyer yesterday quashed speculation that the world's leading central banks were ready to strike a deal to prop up the global economy with lower interest rates.

He said that economic conditions around the globe were too varied for a co-ordinated policy easing and that, at least in Europe, there was no fundamental reason to cut interest rates.

According to Mr O'Sullivan, markets were helped by the Group of Seven industrialised nations (G7) commitment to stabilise the Russian crisis, but a really solid performance would be needed to pull the dollar up again.

"There are not many aggressive buyers. They are all waiting to see what the next summit will achieve as well as watching the actions of the Bundesbank and the US Federal Reserve. The G7 and others need to act on their statements of recent days to achieve long-term results," he said.

And according to Mr O'Sullivan a cut at the US Federal Open Market Committee meeting at the end of this month is unlikely. "All eyes will be on Fed chairman, Mr Alan Greenspan's testimony to Congress today. In his previous speech he indicated a bias to easing rates and it will be interesting to see if he reiterates that," he said.

On top of that, Bank of England governor, Mr Eddie George, told the British Trades Union Congress that rates would be cut if inflation came in below target. British retail prices were also marginally better than expected and that confirmed that the next move in British rates would be down, Mr O'Sullivan said.

Bond markets have also remained stable although very short-term Irish cash is lower. The market is now going into every Monday expecting a rate cut from the Central Bank, according to Mr O'Sullivan. Equity markets were also quiet yesterday.