Pound Sterling hit a seven week low against dollar Tuesday  as U.K. factory production unexpectedly shrank for a fourth month in June. The fear about the health of the financial sector is also added pressure on the cable.

Broad recovery in counter part as oil prices plunged and the Federal Reserve maintained its focus on controlling persistent U.S. inflation pressure in the economy also affected the cable movements.

 

Most of the Investors are looking for the rate decision from BoE on Thursday. But According to the Reuters poll, all 76 economists polled the Monetary Policy Committee would leave rates at 5.0 percent.

 

On influencing news, UK manufacturing data also affected the sterling. Sterling weakened against the dollar after the release of UK manufacturing data last week. The data increased the concern over the weakening UK economy and soaring price pressure

 

According to the data, British manufacturing activity contracted for a third month running and at the sharpest rate in a decade to 44.3 in July, its lowest since December 1998, while the prices component rose to a series high of 82.4.

 

French power giant EDF called off an offer for British Energy diminished the investors’ interest on sterling adversely affected the confidence of the investors. 

 

The BOE has been struggling to balance a sharply slowing economy with surging price amid rising energy and food cost.

 

UK consumer inflation rose to an annual 3.8 percent, dampening expectations of an early rate cut. The Office for National Statistics reported that the Consumer Prices Index jumped to 3.8 per cent in June from 3.3 per cent in May. This is the highest level since 1992 and well above the government’s target of 2%.

 

Last day in spot trading, sterling closed at 1.954(1.9613) against the dollar, after trading in the range 1.9624 – 1.9519.

 

 Weekly Outlook

 

Expecting weakness below 197.14, Supports are 195.80, 194.50, and 193.30. Resistances are 198.00, 198.80, and 201.53.

 

Last day DGBP (Sept) traded in the range 195.36 – 194.65 and closed at 195.03.

 

DGBP (Sept)    - Bullish above $ 195.27; bearish below $ 194.70

COMMODITY	CL.RATE	SUP .2	SUP.1	RES 1	RES 2
DGBP (Sept)	195.03	193.28	194.06	196.03	196.89

Date	GMT	Currency		Forecast	Previous
Wed Aug 6	9:30	GBP	BRC Shop Price Index y/y		2.5%