Sterling Prepares for difficult week.
|Published: ||31 Jan at 10 AM|
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Focus for Sterling this week will be whether the pound can find some stability as concerns about a fragile UK economy as a negative technical picture weighed on sentiment against the pound last week.
Sterling steadied against the euro on Friday, but slipped back against a firmer dollar in this trade as worries over rising civil unrest in Egypt fuelled worries over Middle Eastern countries in general, prompting safe-have demand for the greenback and US Treasuries.
A limited data week for the UK may leave sterling at the mercy of others as the euro and dollar look set for positive showings this week.
Friday’s consumer confidence didn’t help the pound as the Gfk NOP survey fell 8 points in January to -29, the biggest drop since the early 1990s and the lowest reading in 22 months, hit by a rise in VAT and continued looming public spending cuts.
The euro remained steady against sterling on Friday, and the technical picture looking positive for the euro while it traded below its major daily moving averages.
Sterling looks vulnerable against the dollar also, with Phil Roberts at Barclays Capital claiming that “downside remains vulnerable”.
“A break below $1.5680 opens a test of trend line support drawn from the May lows near $1.55. A close back above $1.6060 is needed to alleviate the bearish bias.” Roberts added.
Friday’s weak consumer confidence survey further dampened speculation that persistently high inflation could force the Bank of England to change their stance on the record low interest rates and opt for an increase from the 0.5%. This it is thought will keep sterling below the $1.60 level.
Sterling found some short-lived support after minutes of the BOE’s January meeting last week after policymaker Martin Weale joined Andrew Sentence in voting for a 25 basis point rate rise, but weak data will make an early hike less likely.
Advice for any sterling sellers would no doubt be welcome, and covering at least some of any immediate requirement sooner later than later may be a consideration.