Sterling strengthened to near 0.6935 against the Euro on Monday before drifting back to 0.6950 in New York. Sterlingnhit resistance close to 1.7470 against… … the dollar and weakened to lows close to
1.7380 before recovering back to 1.7435 in early Europe on Tuesday. Sterling
will continue to be pushed around by US and Euro interest rate expectations in
the short term with choppy trading liable to continue in the short
term.

The latest BRC retail survey
recorded a 1.4% drop in like-for-like sales in March, maintaining the run of
disappointing data. The data was distorted by the impact of cold weather, but
will tend to unsettle the UK currency to some extent with persistent unease over
the strength of spending.

The trade data recorded a February
trade deficit of GBP6.5bn, unchanged from an upwardly-revised GBP6.5bn in
January. The goods and services deficit widened to GBP4.8bn from GBP4.6bn. There
are considerable reliability issues with the data, but the underlying
deterioration will undermine confidence. Given the lack of yield support and
growing market unease over countries running trade deficits, Sterling will be
even more vulnerable to the deteriorating trend and structural concerns will
persist.

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