Tuesday July 26, 2005 - 07:25:04 GMT
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CMC Markets - www.cmcmarkets.com
Traders cautious of overexposure leave Euro to soften against Pound.
July 26th - With EUR GBP having come close to testing 0.70 late last week, consensus amongst traders appears to have been that this was marking a move into overbought territory. As a result we’ve seen profit taking on long Euro positions and this has initiated something of a retreat over the last few days, with the currency pair now trading close to 0.6900. Admittedly this looks to be at odds with the fundamentals - German business confidence is seemingly upbeat in today’s IFO survey and the UK residential property market continues to struggle – so the downturn may yet prove to be temporary, but the month-end effect may also be encouraging a degree of book-keeping amongst traders. Essentially however, until we see the concrete signs of interest rate convergence between Frankfurt and London, the common currency may be left to churn sideways. Being August, the ECB won’t meet next week so there can be no change in rates there until September although the Bank of England’s Monetary Policy Committee will be in session next week. The widely discussed 25 basis point rate cut may well materialise and arguably this hasn’t been fully factored into the market. If indeed this does happen, it would be of little surprise if the Pound was to find itself under renewed pressure right across the board.
Stuart Scrase and Enis Mehmet
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