Currency news - Sterling under renewed pressure

Sterling under renewed pressure - 01-12-08

Sterling found support near 0.84 against the Euro on Friday and took advantage of general Euro weakness with gains to near 0.8250 in US trading. The UK currency was unable to make a fresh challenge on the 1.55 resistance level against the dollar.

The latest UK CBI distributive survey recorded a renewed deterioration with a reading of -46 for November from -27 the previous month while retailers were generally pessimistic over near-term prospects. The evidence will reinforce fears over the consumer spending outlook during the crucial December period and the threat of further company failures.

A further cut of at least 0.50% is certainly priced in which should limit Sterling selling, especially with the prospect of further US and Euro-zone cuts, but there is likely to be renewed speculation over a more aggressive MPC stance this week.

The UK data remained depressed with the PMI manufacturing index weakening to 34.4 for November from 40.7 previously. Consumer lending was also depressed for the month, maintaining pressure for a further sharp cut in interest rates and the data pushed Sterling back towards 1.50 against the dollar as risk appetite faded again.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

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