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Monday, December 18, 2006

Sterling Outlook (18th December 2006)

Little on the domestic front for the London market and indeed factors are thin on the ground until Wednesday's release of MPC minutes from the December meeting. The Pound started on a firm note vs both the Dollar and the EUR, continuing to enjoy a strong data, firm rate, environment.

The consensus for UK rate is for a hike at the February meeting but there remains enough uncertainty to keep Cable and EUR/GBP choppy through the turn. Early action suggested scope to 1.9600 but progress was held at 1.9580 and Sterling lost all of its advantage and more. Support is seen at 1.9495 area with initial resistance at 1.9580. Offers are touted between 1.9580 and 1.9600 with stops above 1.9625. To the downside the stops reportedly run in at 1.9490 through 1.9460.

The Dollar side of the equation shows a market adding to last week's gains. Interest rate uncertainty to keep the majors active into the turn although Yen factors could dominate early in the week. US c/a data provides the only interest this session. A rise in the deficit expected for the Q3.

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