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Tuesday, May 08, 2007

Sterling Outlook (8th May 2007)

Sell interest is tipped within a 1.9970/80 window. Upper obstacles include 2.0000, 2.0075 (May 1 high) and 2.0100. 1.9964 was today's Asian session top. Sterling support points include 1.9916 (European morning, intra-day low), 1.9900, 1.9870/80 and 1.9845/50.

The BoE MPC is expected to raise the UK base rate by 25bp to 5.5% on Thursday although four "Shadow" MPC members advocate a 50bp hike (Sunday Times). The FOMC is expected to keep the Fed funds rate at 5.25% tomorrow (Wednesday), with its accompanying statement of prime interest.

EUR/GBP ran into resistance just shy of 0.6829 (yesterday's high) in early European trade. Rumoured selling of EUR/USD by European Central Banks, plus disappointing German industrial production data, has been blamed for its subsequent drop to six-day lows just shy of 0.6800. Some sell stops are tipped below 0.6800. The cross last traded sub-0.6800 a fortnight ago (Apr 24).

Annualized UK wage growth eased to 3.6% in April, from 3.7% in March, according to the Voca take home pay index.

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