Sterling markets have calmed down after yesterday’s solid rise in cable

<p>  GBP/USD Range: 1.6124 – 1.6184 Support: 1.6100 Resistance: 1.6240 Sterling markets have calmed down after yesterday’s solid rise in cable on the back of […]</p>


Range: 1.6124 – 1.6184
Support: 1.6100
Resistance: 1.6240
Sterling markets have calmed down after yesterday’s solid rise in cable on the back of the inflation data, with the pair settling above $1.6120, opening at $1.6124 in Asia this morning and remaining on a firm tone assisted by some strong euro-dollar demand from Asian sovereigns. Buying of sterling in the crosses has also helped to underpin. Cable rallied from the open to a high of $1.6168. Offers remain layered up to $1.6200 from retail accounts, unloading sub $1.6000 purchases. Bids are now seen around $1.6120 and $1.6080.Focus this morning will be on the UK employment and earning data at 0930GMT followed by the BOE inflation report at 1030GMT and BOE Governor Mervyn King’s address.
Range: 1.3485 – 1.3571
Support: 1.3450
Resistance: 1.3600
Euro opened in Asia at $1.3488 and rallied on firmer equity markets a strong China fixing and some Asian sovereign demand through $1.3500 to a high of $1.3539 before easing to $1.3520. Talk of strong bids now at $1.3470 and $1.3450 with massive stop losses building on a break of $1.3370 from system break out traders. Offers were layered towards the 100 day MA currently around $1.3540 and $1.3550, but these were filled just ahead of the European open by some aggressive buying from Japanese names which tripped stops at $1.3565 and extending the high to $1.3571 before easing back to $1.3565. News that the WestLB’s restructuring plan had been sent to the European commission also helped to buoy the euro. There is little to excite in the way of European data today with main focus on the US PPI, housing, and Industrial production data this afternoon.
BoE Inflation Report
The Bank of England’s February Inflation Report, out Wednesday, looks set to back the case for monetary tightening with inflation shown overshooting the BOE’s target on flat Bank Rate and with an equal chance of it being above or below target if markets’ implied rate hike expectations are met. Implied market rate expectations have risen sharply since the November report. In the 15 day average used by the BOE they were pricing in a May hike and at least one more hike this year, and yet BOE Governor Mervyn King revealed in a letter Tuesday the report would show the chances of CPI being above/below target in 2 to 3 years time were roughly equal, the same as in Nov.

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