Tripped stops below 1.9690 helped depress cable to a late European morning low of 1.9620, following a fresh bout of profit-taking on long GBP/USD positions by speculative accounts. Prior profit-take selling from spec accounts was also seen above 1.9700 yesterday, a day when sterling rallied from 1.9591 to a high of 1.9742. A four-week peak of 1.9752 was scaled in Asia today.
Demand is expected to emerge at 1.9600/10 on any slide extension. Sub-1.9591 support points include 1.9569 (last Friday's floor), 1.9550, and 1.9515. One of the major factors underpinning the pound is the potential for a 25bp UK base rate rise to 5.25% next month (Feb 8), and a further hike/s beyond. The pound is therefore seen at risk of depreciation should the UK monetary policy outlook take an unexpected dovish turn. Blanchflower speaks on Thursday.
December's US ISM manufacturing index will be disclosed at 15:00GMT, alongside November construction spending. The ISM index is expected to rise to 50.0, from a three-and-a-half-year low of 49.5 in November. Minutes from the December 12 FOMC meeting are due at 19:00GMT.
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