Sterling rose against dollar Wednesday after Bank of England minutes showed a policymaker had favored an interest rate rise.

 

In the last meeting on July 9-10 BOE had kept interest rate steady at 5 percent. The minutes encouraged the investors even though some of the participants expecting a rate cut

 

But on Thursday sterling had declined against the broadly strong dollar on comments from a Federal Reserve official that interest rate rises may be needed before labour and financial markets recover.

 

On Monday sterling had crossed and closed above the psychological level $2 mark on short covering and improved sentiments on the financial sector.

 

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

 

Shares in UK banks followed their US counterparts higher after JP Morgan reported better than expected second quarter results. Sentiment on the banking sector was also lifted as Bradford & Bingley won investor backing for its critical 400 billion pound rights issue.

 

At the same time 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%.

 

Spanish bank Santander's 1.3 billion pound bid for smaller British rival Alliance & Leicester, which changed the view of weakening banking and housing sectors, supported the sterling.

 

Last day in spot trading, sterling closed at 1.9977 (1.9906) against the dollar, after trading in the range 2.0029– 1.9901.

 

Weakness expected below 1.9907. Supports are 1.9750, 1.9645, 1.9510; resistances 1.9996, 2.0090, 2.0218.

 

Last day DGBP (Sept) traded in the range 199.50 – 198.31 and closed at 199.05.

 

TECHNICAL OUTLOOK (Intra-day)

 

DGBP (Sept)    - Bullish above $ 199.27; bearish below $ 198.70

COMMODITY	CL.RATE	SUP .2	SUP.1	RES 1	RES 2
DGBP (Sept)	199.05	196.67	197.30	200.00	200.70

 

 

DATA TO WATCH

2008 July 24