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FX Update: Sterling Spikes, Continues Monday's Rally

Posted:18/11/2008 8:45 by Peter Burnside
GBP spiked higher amid US name demand, which lifted Cable to 1.5084 highs from European opening levels of 1.4980-85, while EUR/GBP triggered a round of stops below 0.8400 and extended to 0.8373 lows on UK clearer selling. The sterling move is a continuation of Monday's rally, which was pinned on profit taking activity and general position adjustment after the extreme selling seen last week, which forced sterling down to 13-year lows on a trade weighted basis and Cable down to 1.4555. Overstretched positioning and oversold technical studies have contributed to the deep corrective, although the level of bearishness in the pound may have been overdone given the breadth of negative news that is now already price in to the market. European traders also believe that the ECB may actually be behind the curve relative to the BOE, which has encouraged proprietary name interest and some readjustment by macro accounts generally. The market will look towards today's detailed terms of the goverment's bailout of banks, which will be disclosed today by Chancellor Darling. Elsewhere, ex-MPC member Buiter asks whether the UK is already experiencing a sterling crisis in his regular FT blog. click here to return to the top of the page
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