Sterling found support close to 1.7665 against the US dollar and strengthened back above 1.77 before a peak just above 1.7850 in New York.


Sterling...

... retained a firm tone against the Euro at
close to 0.6835 and held the bulk of gains against the dollar, trading just
below 1.78 in early Europe on Wednesday. Following the US interest rate
increase, rates are now equal to UK rates at 4.5%. The next interest rate moves
in the UK and US will, therefore, have a very important impact in determining
Sterling sentiment while market volatility is liable to increase as markets
debate economic trends in both economies.

The UK consumer confidence index
recorded a recovery to -3 in January from -9 the previous month which will boost
confidence over retail spending tends, although the impact was offset slightly
by a disappointing CBI retail survey. Sterling was undermined only briefly by
comments from BOE member Nickell which called for a cut in interest rates as the
majority of MPC members are more likely to vote for unchanged rates. The CIPS
index for the manufacturing sector was slightly stronger than expected with a
rise to 51.7 in January from 51.3 which will offer slight Sterling
support.


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