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Monday, December 11, 2006

Sterling Outlook (11th December 2006)

There are a raft of potentially market-moving UK event risks this week, including tomorrow's 09:30GMT November inflation figures, Wednesday's unemployment and earnings numbers, and Thursday's November retail sales. Annualized CPI is forecast to rise to 2.6%, from 2.4% in October.

GBP/USD tripped stops above 1.9550 in early European trade, as it pushed its recovery envelope from an Asian session 11-day low of 1.9467. Offers circa 1.9565 capped those gains. 1.9565 is an approximate 38.2% Fibo retracement point of the drop from Friday's post-Michigan Sentiment high of 1.9729 to 1.9467. Cable's subsequent retreat extended through 1.9500 post-UK PPI.

M&A-wise: Brazil's CSN has trumped India's Tata Steel with a GBP 4.9bn bid for Anglo-Dutch Corus (Times website). In other news: Pearson has agreed to sell its government services unit to Veritas Capital for $600mn (Times website). Prudential has rebuffed a GBP 500mn offer for Egg from Citigroup (Telegraph). This week's key US event risk is tomorrow's FOMC meeting. US November inflation figures are due on Friday.

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