Thursday July 8, 2004 - 09:30:30 GMT
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INVESTICA Ltd - www.investica.co.uk
UK rates likely to unchanged
The central bank is likely to keep rates unchanged today and this is likely to undermine Sterling slightly, although major selling pressure is unlikely given that a rate increase is likely in August. Sterling is vulnerable to a temporary retracement back below 1.85 against the dollar, potentially to at least 1.8460 before fresh buying interest emerges. Losses against the Euro should be held to 0.6710.
Sterling pushed to a high of 1.8550 against the US currency and remained above the 1.85 level on Thursday despite pressure for a correction. Sterling was little changed against the Euro at 0.6675.
The Bank of England is due to announce its rate decision at 11.00 GMT today. The most likely outcome is that rates will be left unchanged at 4.5%. If so, Sterling will be vulnerable to some profit taking, although aggressive selling appears unlikely, especially as a rate increase is likely in August.
If the bank does increase rates today, Sterling would be likely to strengthen sharply, potentially to at least 1.86, but it could then be vulnerable to heavy profit taking due to speculation that UK rates will not rise again this quarter.
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