British Pound Sterling

The pound sterling (Currency:GBP) is caught in no-mans land this morning. With global markets flat, the UK currency will be awaiting further newsflow concerning the Eurozone situation for further guidance.

The pound euro exchange rate is 0.24 pct down on Tuesday's close at 1.2420. (Our latest pound euro forecasts are published on our IMT site, please visit via our Facebook entry path here).


The pound dollar exchange rate is 0.03 pct higher at 1.5574. The pound Australian dollar exchange rate is 0.09 pct down at 1.5625.

On the technical front, we could see fresh advances against the US dollar, this according to a research note issued by Investors Intelligence this morning:

"The British currency launched a recovery from an oversold state (see RSI) against the US Dollar at the start of the month. 

"That counter move recently stalled near the sideways level along US$1.56, as old support in that area converted to resistance.  Should Sterling manage a sustained breakout, the next target is US$1.57, and potentially US$1.58 after that.  We will consider buying Cable in that event."

AS mentioned, Europe remains key on the fundamental front as for now UK data remains of secondary importance.

For sterling interest rate differentials remain key. And, thus we watch Eurozone bond price action.

Spanish sovereign bonds continued to weaken on Tuesday. The 10y yield set a new euro-lifetime high and ultimately rose 19 bp on the day.

According to Gareth Berry at UBS, "Sovereign bonds in Italy, France and even Germany also fell quite sharply – while we would caution against over-interpreting a single day’s price action, this could be a sign that investors are now beginning to price in one of two possibilities: either a systemic escalation of the crisis that threatens the entire Eurozone, or a concerted policy response that ultimately sees fiscally-strong Eurozone countries stand behind the weak."

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