Tuesday January 24, 2006 - 11:34:26 GMT
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INVESTICA Ltd - www.investica.co.uk
Sterling continued to gain from US dollar vulnerability on Monday and strengthened to highs above 1.7850. The very limited correction following Sterling gains of over 300 basis points since late last weak illustrated the dollarís underlying vulnerability and the shift in dollar sentiment will provide underlying UK currency support, but there will still need to be a short-term correction. Sterling was able to resist substantial losses against the Euro, but still weakened to 0.6880 as the Euro retained a firm tone.
The CBI monthly industrial survey recorded a deterioration in the orders index to -28 in January from -22 in December, but there was a recovery in output and export orders. The Bank of England minutes will be watched closely on Wednesday with Sterling vulnerable if there were more than one vote for a rate cut. The most likely outcome is that rates will be left on hold in the short term, but the expectations of rising ECB interest rates will tend to keep Sterling under pressure against the Euro.
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