Thursday June 9, 2005 - 09:54:20 GMT
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INVESTICA Ltd - www.investica.co.uk
Bank of England should be on hold
Sterling pushed to near 1.84 against the US currency during Wednesday, but then fell sharply as the Euro reversed course and fell to a low of 1.8220 in late New York. Sterling staged a minor recovery in early Europe on Thursday and held close to 0.67 against the Euro as the Euro weakened. The technical selling pressure is likely to remain strong on any renewed rallies back towards 1.84.
There was a bigger than expected industrial production rise for April with a 0.9% monthly increase after a sharp March decline. The annual figures, however, still recorded the worst performance for two years and confidence in the manufacturing sector will remain weak. The data will not intensify pressure for a Bank of England rate cut. The trade deficit figures were in line with expectations with a GBP4.8bn deficit for April.
The Bank of England will announce its interest rate decision at 11.00 GMT on Thursday. Unchanged rates are the most likely outcome as the central bank will not want to make a quick decision to change rates in response to recent economic weakness. Any decision to cut rates would, however, weaken Sterling sharply.
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