IFX Market Report

IFX Market Report 

Sterling rose yesterday, boosted particularly against the US dollar after a weak reading of U.S. employment kept the U.S. currency under selling pressure.

The pound was supported versus the US dollar, but gains were limited and sterling was unable to push higher against the euro as investors remain incredibly wary of the UK's mounting debt burden and weak economy, and more recently concerns about political uncertainty.

By early afternoon trade sterling had climbed 0.6 percent to $1.6130, not far from the eventual high of the day of $1.6194.

US dollar selling pressure continued from last week's poor payroll figures and also after a Federal Reserve official said yesterday that like the UK, U.S. interest rates were likely to remain low for some time.

Some traders said they expected sterling to push above 1.6250, giving it its strongest position in almost a month against USD, lacking a big driver to push sterling on however would mean gains would be limited after that. Barclays however were more optimistic saying in a note that "Early this week we suspect cable will trigger stops above $1.6250 and revisit the $1.63/1.64 area,"

The New Year can be quite an optimistic time for the UK, however sterling has been weighed down heavily by the view the UK economy will continue to struggle. Even with the prospect of exiting recession sterling is not necessarily seen gaining.

With the Bank of England seen as one of the last of the major central banks to raise interest rates, political uncertainty, investor uncertainty and even the recent cold spell having an effect, sterling may have caught a cold and could be in for a hard slog until the spring.

At 9.15am the pound was at $1.6095, €1.1112, 11.95 ZAR, 147.82 JPY, 11.3519 SEK and AU$1.7318. The euro retraced some of its gains against the US dollar at $1.4512.

Intraday Support and Resistance