Thursday June 10, 2004 - 09:19:59 GMT
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INVESTICA Ltd - www.investica.co.uk
Sterling waits for Bank of England boost
Immediate direction will be set by the Bank of England rate decision. The chances just favour a rate increase which will underpin Sterling, but strong buying is unlikely. Overall, Sterling strengthen against the US currency with a potential move to at least 1.8350. Aim to put stop-loss in place at 1.8290 ahead of the 11.00 GMT rate decision. Sterling offers little long-term value against the Euro stronger than 0.6570.
Sterling dipped to a low of 1.8250 against the US currency as the dollar rallied, but the losses were relatively contained given the sharp dollar gains against the Euro and Sterling edged higher in early Europe. Sterling gained strongly against the Euro to 0.6575 before a slight retreat in early Europe on Thursday.
The Bank of England rate decision will be an important short-term market influence. Overall, there is a 60% chance that the Bank will increase rates by 0.25%. A rate tightening has been discounted to some extent and aggressive Sterling buying is unlikely, but the net impact of a rate hike should trigger mild Sterling gains, as was seen in the case of the New Zealand dollar earlier. Sterling will be vulnerable to a sharp dip if rates are left on hold, but losses should prove temporary.
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