Thursday July 20, 2006 - 10:17:01 GMT
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INVESTICA Ltd - www.investica.co.uk
Retail boost for Sterling
Sterling found support below 1.8250 against the dollar on Wednesday and strengthened back strongly to highs above 1.8425 in New York as the dollar reversed course. Sterling remained strong against the Euro and was holding above 1.84 against the US dollar in early Europe on Thursday.
UK retail sales rose 0.9% in June to give an annual increase of 3.7% which will boost optimism over domestic spending levels, but the positive impact on Sterling will be offset by bad government borrowing figures with a record deficit for June.
Interest rate considerations will remain important in the short term and the more cautious than expected tone from Fed Chairman Bernanke will offer important short-term relief as US interest rates are downgraded. Sterling will, however, still find it difficult to gain support on yield considerations given that the Bank of England appears reluctant to sanction a near-term increase in interest rates.
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