Friday April 7, 2006 - 10:05:04 GMT
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INVESTICA Ltd - www.investica.co.uk
Short-term Sterling relief
Sterling strengthened to near 1.76 against the dollar in Europe on Thursday ahead of the ECB interest rate decision before weakening back to near 1.75 as the dollar regained ground. Sterling was, however, able to recover against the Euro and pushed back through the 0.70 level to highs near 0.6970. Sterling retained gains against the Euro on Friday with a move to 0.6965 and was holding close to 1.75 against the US dollar in cautious trading ahead of the US data.
As expected, the Bank of England left interest rates unchanged at 4.50% after the latest monetary meeting on Thursday. The minutes will be important to assess underlying MPC thinking when they are released on April 19, but markets will assume that domestic rates are likely to remain on hold in the short term. Sterling will continue to be pushed around by dollar and Euro moves, although the disappointing recent data is still likely to give a negative bias to the UK currency. In this context, the data over the next two weeks will be important for interest rate expectations and Sterling.
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