Sterling's strong link to the euro has been exacerbated by recent news that suggests the pound may follow its single-currency counterpart in becoming a funding currency, it has been reported by the Wall Street Journal.Although the pound has seen relative buoyancy against strong currencies, it has been touted that a further slip in euro fortunes could have a direct impact on the currency's outlook, with domestic economic data looking gloomy. This has seen a market shift from its position as a refuse currency to becoming a favoured currency to sell.The pound fell to its weakest level since July 2010 against the dollar, trading at around $1.53. Recent research by the centre for Economics and Business Research (CEBR) suggested that the UK has already returned to a recession, with growth forecast to be negative in the last quarter of 2011 and the first quarter of 2012.The Bank of England is also expected to keep interest rates low, which is a further attraction for using it as a currency to fund bets in higher-yielding currencies such as the Australian or New Zealand dollars.Morgan Stanley issued a note on Monday saying: "While rating downgrades in Europe may provide some initial safe-haven flows for the pound, our analysis suggests that these sterling flows are showing signs of slowing, leaving it increasingly exposed."For more information on foreign exchange treasury services and risk management, visit our Corporate FX site