Tuesday May 25, 2004 - 09:50:23 GMT
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INVESTICA Ltd - www.investica.co.uk
Rate expectations will boost Sterling
Expectations of a near-term monetary tightening will continue to underpin Sterling and high oil prices will also tend to be slightly Sterling supportive. There is scope for further gains on a trade-weighted basis. Sterling is liable to hit near-term resistance at 1.8050 against the dollar, but a sustained break of this level would increase speculation of a move to at least 1.8200. Sterling is likely to hit further near-term resistance at 0.6680 against the Euro.
Sterling strengthened to a high of 0.6680 against the Euro before retreating to 0.6695 in early Europe on Tuesday. Sterling strengthened through the 1.7950 against the US dollar and Sterling strengthened to a high of 1.8060 in Europe on Tuesday as the dollar suffered general damage.
Rate expectations will remain the dominant domestic influence and there will be further speculation that the next rate hike could be brought forward to June. The housing inflation figures will be closely watched this week with Nationwide Bank figures due for release on Wednesday. A further strong monthly increase would reinforce expectations of a near-term interest rate hike.
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