Sterling continued to take advantage of dollar vulnerability and strengthened to highs above 1.7850 in Europe on Monday after a weak corrective dollar recovery back...

... to 1.7810.

Sterling has proved relatively resilient against the Euro over the past 24 hours with only
limited losses to 0.6930 in early Europe on Wednesday.

The Bank of England minutes recorded
a 7-1 vote for unchanged rates in April with one seat vacant while Nickell again
voted for a 0.25% rate cut. The most likely outcome is that the bank will leave
interest rates on hold in the short term. Sterling will secure some further
protection against the dollar from the reduction in US interest rates
expectations in the short term, but there are still likely to be concerns over
the UK economic outlook, especially in the manufacturing sector.

Any sustained drop in global
liquidity would also tend to lessen the potential for capital flows into the UK
markets and the UK fundamentals do not look convincing which will limit the
potential for Sterling gains on a trade-weighted basis.


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