Cable opened in Asia around 1.9770 and we have seen a range of 1.9760-1.9785 in quiet trading. EUR/GBP opened around .6840 and has been quiet as has GBP/JPY, which opened around 238.75 and has drifted quietly higher throughout the day, peaking so far at 239.10. Order books are bare around current levels, hence the tight ranges. Cable sellers are plentiful around 1.9870-1.9900 and some light buying is seen around 1.9750. Buy orders in EUR/GBP are firm around .6800-10.
Much of the UK press is carrying stories on yesterdays BOE inflation report. A rise to 5.75% is unanimously favoured and further upside risk is seen with Governor King being quoted as saying the main risk is that companies become more confident of their ability to raise prices and in turn pay higher wages.
Such talk should continue to fuel the carry trade flame. Flow data from the MoF shows that Japanese investors were net buyers of Y532.7 bln in foreign bonds in the week ended May 12. The GBP is thought to be one of the major beneficiaries of these new issuances.
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