Thursday December 9, 2004 - 11:17:02 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
Trade doubts for Sterling
The weaker than expected trade figure will unsettle Sterling slightly and could increase the risk that UK companies will call for a weaker currency. The profit taking on high-yield currencies will also leave Sterling vulnerable to some selling, especially with the Bank of England likely to keep rates on hold. Sterling is likely to remain in a corrective phase against the US currency and could slide towards 1.9120, but further substantial losses appear unlikely.
Sterling weakened to a low just below 1.92 against the US currency on Wednesday before rebounding back above 1.93. In early Europe on Thursday, Sterling has retreated back to 1.9260 and UK currency losses increased after the trade figures. Sterling strengthened to 0.6870 against the Euro on Wednesday before weakening back to 0.6935 on Thursday.
The UK trade account was weaker than expected with the deficit widening to GBP5.3bn in October from GBP4.4bn the previous month even though the oil account swung back into surplus. There is a risk that Sterling will start to be infected with the current account concerns that have been affecting the US dollar, although the deficits are not on the magnitude of the US. There will also be the potential for UK industry to call for a weaker Sterling exchange rate and this will deter speculative inflows to some extent.
The Bank of England is likely to keep interest rates on hold at 4.75% and there is very little chance of a change in rates. A statement is also unlikely which will minimise the impact. A wider sell-off in the Australian, Canadian and New Zealand currencies will also increase the risk of a reduction in long Sterling positions.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."