Sterling continued to benefit from a weaker US dollar on Tuesday and Wednesday with a push to highs above 1.75 against the US currency before… … a slight retreat.

Sterling was able to resist a
decline through 0.69 against the Euro and was holding close to 0.6885 in early
Europe on Wednesday while there were renewed gains above 1.75 against the
dollar.

The UK currency will be in a better
position to resist selling pressure against the dollar if US interest rates
appear close to peaking and, in this context, the latest Fed minutes will offer
support. Although US interest rates are still likely to increase in January to
4.5%, there is a greater possibility that US rates will not move above UK levels
during the first quarter and this will offer Sterling
relief.

Overall buying interest will still
be limited by the fact that markets will still be expecting another UK interest
rate cut. The combination of faltering UK growth and a Euro-zone strengthening
trend will tend to weaken the UK currency against the
Euro.

www.investica.co.uk