Foreign Currency Market Update – GBP / EUR Update
Sterling has been creeping back towards the June highs over the last few weeks after finding support from a key technical trend line (marked in blue on today’s chart). A setback came yesterday after data confirmed a widely expected moderation in consumer price inflation. The figure came in at 3.1% for July, down slightly from 3.2% in June. Technical factors were also blamed for yesterday’s weakness after the Pound broke major support levels against the US dollar, leading to broader based selling.
The Pound is trying to put best foot forward this morning after the minutes from the latest Bank of England meeting showed that the nine strong committee voted 8-1 in favour of no change in interest rates. The lone voice for a rate hike was Andrew Sentance, who has voted for tightening at the last few meetings. Investors will be mildly reassured that Sentance is sticking to his guns after a run of weak data on the housing market, and the slowing inflation outlook contributed to a general feeling that we are sliding toward a double dip.
The technical outlook is mixed. Sterling has moved out of the danger zone by putting in three weeks of moderate gains, but buyers of the Euro should consider placing a stop order behind the market in case the trend reverses.
