Tuesday November 14, 2006 - 11:48:19 GMT
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INVESTICA Ltd - www.investica.co.uk
Inflation data undermines Sterling
Sterling weakened to lows just below 1.90 against the US dollar on Monday due to a combination of a firmer US dollar trend and a slightly weaker tone against the Euro. The UK currency recovered back to 1.9040 against the dollar in early Europe on Tuesday in choppy trading before weakening again after the inflation data.
UK consumer prices rose 0.2% in October with the annual increase dropping slightly to 2.4%. The core annual increase was also held to 1.4% for October. The moderate data will ease fears over inflation to some extent, although the impact will be measured as the Bank of England will remain concerned over the underlying situation.
The heavy weight of existing long speculative Sterling positions will remain an important barrier to further short-term Sterling gains, especially given the amount of tightening already priced in, and will increase the risk of Sterling corrections weaker if forthcoming data remains weaker than expected.
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