Sterling begins to shine as the Euro struggles to find support
Disclaimer: THIS MATERIAL IS NOT INVESTMENT RESEARCH AS DEFINED BY THE FINANCIAL SERVICES AUTHORITY
The US Federal Reserve signalled yesterday that the economic recovery was gathering strength as it kept rates near zero. The FOMC adopted a general more positive tone in its policy statement. Stock markets rallied and investors are diving back into sterling as risk appetite increases. The inverse correlation between risk appetite and the US dollar is hard to miss in this environment.
The Euro has continued to weaken against other major currencies, against the US dollar the single currency has been pushed back below the 1.4 level. The Euro has also felt the pressure against the pound with Sterling-Euro trading at 1.16 this morning.
The pound has also rallied against the US dollar and looks likely to break out of the sideways range formed over the recent days. The first significant resistance level dollar bulls are expected to defend will be around 1.6310-1.6325.
A clean break above 1.64 will imply further medium term dollar weakness potentially driving cable to the 1.6650 region.
Thursday 28 January 2010, 11:55am
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