The pound appears to be gaining ground against sterling and is back over 90p against the British currency. In what has been described as a "dream day" for the authorities here the pound rallied against sterling while falling against the deutschmark.

The irony is that sterling fell heavily despite another rate rise in Britain which could have been expected to boost the British currency.

Sterling's long bull run was halted when the Bank of England implied that the current series of rate rises could be at an end. Traders said the temptation to take profits is now intense as the rate environment is a lot less certain.

The bank base rate has now risen by one percentage point since the British general election, bringing higher mortgage and business borrowing costs. The Bank of England said that the latest rate rise brings British rates to a level which is consistent with its medium-term inflation forecast.

As a result sterling fell to 2.9748 deutschmarks from DM3.0563 on Wednesday. The pound fell to DM2.6883 from DM2.6971 and rose to 90.46p sterling from 88.24p.

The moves should completely eliminate the need for a revaluation to be considered, Dublin analysts said.

Mr Jim Power, chief economist at Bank of Ireland, pointed out that the "perfect combination" of the pound rising against sterling and falling against the deutschmark will have greatly eased pressure on the monetary authorities.

"The action we saw with sterling falling almost 10 pfennigs in 24 hours simply underlines how volatile it is and how much of a mistake revaluation could be."

Mr Power and Mr Oliver Mangan economist at AIB Capital Markets both said sterling will now be waiting for indications of autumn consumer spending. Although Mr Power is expecting sterling to return to a value of more than DM3. According to Mr Mangan new car sales in August, when the new registrations come out, will be key.

The Bank of England is likely to closely monitor data over the next few months and see how consumer spending is developing, he said.

The Bank and the markets will also be closely watching whether consumers are still spending their building society windfall gains this autumn. If the numbers are strong then the Bank of England may pass on further rate rises later in the year.

In the meantime, sterling could give up some more of its recent gains and fall back towards DM2.90. However, further losses are unlikely unless it becomes clear that the British economy has started to slowdown. The fall in the value of sterling led to a surge on equity markets and the FT-SE index of the 100 leading British stocks soared over 60 points to a new all-time high of 5086.8. Investors were delighted at the indications from the Bank of England that the latest quarter-point rise in British interest rates will be the last for some time, and believe that further weakening of sterling will benefit British corporate earnings.