When starting the engine when cold the needle doesn't move at all when driving.
When starting the engine when hot the needle will rise up to about a quarter and then just fall down to its starting position.

Does anyone know what might be causing this?

 

Have you tried replacing the coolant temperature sensor?

 

mines doing this atm aswell..

 

the senders are only a few quid mate, they screw into the head to the right hand side of the exhuast manifold.

 

Where can i get a sender from?

Would one from a scrappy do, or am i better off buying new.

Are they the same throughout the mk2 fiesta range or are they exclusive to the xr2?

 

theyre all the same mate, id imagine most fords pre 1990 use the same sensor. you'll get one from a motorfactor, no point getting on from a scrappy as theyre cheap as chips new anyway, you know youre not getting a duff that way aswell!

 

defo faulty sensor me thinks. I've had 2 of these pack up on cars i've owned doing exactly the same thing as you've described.