Sterling is trading stronger following yesterday’s bigger than expected UK government borrowing figure and a mixed bad of BoE MPC speak during parliamentary testimony, the net takeaway of which is there seems a lack of urgency before another rate hike, to following the one earlier this month, would be due. Cable has crawled back over 1.3250, nearly 50 pips up on yesterdays low. The pound is also stronger versus the euro and yen. We would characterize Cable as remaining in a sideways oscillation centred around the 1.3200 level, which has been enduring for over six weeks, during which time advances above 1.3000, and declines below 1.3100, have consistently proved to be short lived. The pound remains down by about 15% in trade-weighted terms since the vote to leave the EU in June 2016. Technically, I remain LONG from November 16 with target 2 at 1.3292, H4 support resides at 1.3180 and resistance at 1.3280. Today’s UK Budget is likely to have limited impact on sterling, assuming the Chancellor Philip Hammond does not surprise markets with any significant fiscal stimulus, the market is expecting limited stimulus and continued emphasis on prudence and deficit reduction measures.
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Senior Market Analyst
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