FX070 TorFX - US Dollar update
Market Update - GBP USDLast Wednesday's quarterly inflation report put sterling on the back foot, sending it reeling down towards 1.6500. It wasn't so much the data that hurt, since we already knew that inflation had declined to just 1.1% in September. Gloomy comments by governor Mervyn King kept markets guessing over whether further quantitative easing is in the pipeline. "We have a completely open mind as to whether to do more asset purchases..." was the phrase that sterling took exception to. However, by Thursday the pound was bouncing back as the wider market decided that the comments were designed to avoid any further disappointment should the bank chose to extend the QE programme. That could be symptomatic of the general sterling trend lately. An initial kneejerk reaction to bad news/comment seems to be followed by a swift rebound as investors struggle to find new reasons to sell the pound.
As we've said before in these updates, "what should go down and doesn't go down can only go up". That's just a common market proverb and we shouldn't be unduly optimistic just because it sounds good; but like all proverbs, it does carry some truth, and we would not be surprised to see sterling continue to rally towards the 1.7043 level that marked the 2009 high in due course. The short and medium term trend is up, and the first important support level is 1.6250, where we spent some time consolidating in late October/early November. A break below that level would be cause for concern, but in the meantime we are giving the pound the benefit of the doubt.
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analysts. Any analysis and/or forecasts provided are aimed at
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Labels: usd-update
Posted at: 14:33
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