Wednesday May 19, 2004 - 09:35:24 GMT
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INVESTICA Ltd - www.investica.co.uk
Bank comments boost Sterling
Daily Market analysis 19/05/04
An easing of selling pressure on high-yield currencies providing initial UK currency relief, especially with speculation over a 0.5% hike in interest rates next time. There is the potential for a move to 1.7850 against the US currency and a move above this level would be a positive medium-term signal for the UK currency.
Sterling found support at 1.7620 against the US dollar and strengthened to 1.7770 in early Europe on Wednesday. Sterling also strengthened to 0.6755 against the Euro and strengthened to above 1.78 after the Bank of England minutes.
The global considerations will remain important in the short term and the recovery in high-yield currencies will offer near-term Sterling support, although it is doubtful whether this correction will be sustained for long.
The Bank of England voted 9-0 for a 0.25% rate increase in May. Officials, however, suggested that there was a stronger case for being less cautious over interest rate rises and this will increase speculation that the bank could raise by rates 0.5% next time, possibly in July. The net implications should be Sterling positive in the short term.
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