Sterling is backing away from Friday's 14-year highs and looks to be following EUR/USD through stop loss orders. The Dollar is recovering across the board as the ISM data impact loses its grip on the US unit. The Dollar index is currently at session highs of 82.74 having dipped to 82.31, a new low, earlier in the session.
The theme of a weakening US economy is unlikely to leave the market any time soon and the prospects of easier US money in 2007 will continue to lean on the Dollar. Rate differentials will be the main currency driver into the end of the year and with hawkish undertones to the ECB policy stance Cable will no doubt be taking its lead from EUR/USD. This week is also packed with interest rate decisions, including the BoE-MPC announcement on Thursday. Short Sterling contracts are higher again, reflecting the "soft sales" fear for UK retailers.
Rates are expected to stay at 5.0% in the UK but a move by the ECB has been factored. GBP/USD currently trades at 1.9775 having dropped almost a big figure from Friday's top in early Monday trade. Talk of stops tripped at 1.9795 and further orders touted under 1.9750. The market looks like 1.9700 to 1.9800 on the wide with risk of another foray to the topside.
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