Monday January 3, 2005 - 11:21:14 GMT
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INVESTICA Ltd - www.investica.co.uk
Near-term Sterling weakness
Concerns over the housing sector will expose Sterling to selling pressure early in 2005, although it is still possible that the central bank will have to increase interest rates again and Sterling selling may reverse later in January. In the short term, Sterling is liable to weaken back to at least 0.71 against the Euro. Volatility against the US currency will continue and, overall, Sterling should find support below 1.90 in the short term, possibly at 1.8960.
Sterling strengthened to a high of 0.7045 against the Euro in Asia, but it was unable to sustain the gains and weakened back to 0.7075 in early Europe on Monday. UK financial markets are closed on Monday and the trends on Tuesday will be important for Sterling's near-term direction.
There will be further speculation that the UK housing market will slow sharply and also damage the wider economy during 2005. These concerns are likely to expose Sterling to some downward pressure in the short term, although strong December retail sales figures would help ease the selling pressure on the UK currency.
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