Friday November 26, 2004 - 11:03:12 GMT
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INVESTICA Ltd - www.investica.co.uk
Sterling forges higher
There will be further speculation that UK rates have peaked. Domestic factors will, however, still be a background focus with investors concentrating on wider dollar developments in the short term. The dollar risks have increased, but the US currency will offer medium-term value above 1.90 against Sterling. The UK currency offers short-term value on any dips to 0.7050 against the Euro.
Sterling weakened slightly beyond the 0.70 level against the Euro, but the UK currency surged to a fresh 7-month push above 1.89 against the dollar in Europe on Thursday. Sterling broke above 1.90 in early Europe on Friday before a sharp retreat to 1.8890.
Bank of England member Bean's comments on the domestic economy were broadly mixed with the bank anxious to keep all policy options open. Bean did suggest that the housing sector was weakening, but the bank officials will remain cautious and there is certainly little immediate prospect of a rate cut unless there is a Sterling surge towards 2.00 against the dollar.
The CBI industrial data was weak with the orders index dipping to -16 in November from -12 in October, the lowest level since June. The CBI has also cut its GDP forecasts and there will be concerns over the impact of dollar weakness on the UK export sector.
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