Sterling surges on further bank assurances
Sterling is trading slightly lower this morning but still holding support on the back of the US government announcing they may pump further cash into US banks. The move prompted risk appetite in the market as investors chase returns that could potentially outperform US cash. The correlation between equity markets and the Sterling has been especially tight as of late, reflecting this term ‘risk appetite’. A stronger equity market leads to an increase in risk and in turn, investors dump USD and purchase GBP. So keep an eye on the FTSE, it can be a reasonable gauge as to where cable is heading. UK Retail Sales numbers released on Friday afternoon showed a significant increase of 0.7% vs. forecasts of 0.0%. The number took some participants by surprise, but does reflect the heavy discounting high street shops have undertaken over the past few months. We saw a subsidiary increase in GBP long positions post the figure, but any optimism around a potential run towards 1.5000 is somewhat absent. On the data front this week, we will be privy to Revised GDP on Wednesday, expecting a confirmation of the -1.6% contraction we witnessed last quarter. Governor King testifies before the Parliaments Treasury Committee on Thursday and Nationwide HPI is expecting another fall of over 1%. We see a continuation of support around the 1.4100 – 1.4200 mark, and vs. the EUR, 1.1000 – 1.1100 should hold firm. Read Full Article »
