Sterling Debt Fears will Return

Daily Forex Fundamentals | Written by Investica | Apr 24 09 13:16 GMT |

The UK debt position will remain very important with the huge borrowing requirement still a very important medium-term risk factor for the currency. These risks have been magnified by speculation over a credit-rating downgrade and any move to actually cut the rating would be a very important negative factor for the UK currency. Such action looks unlikely for now which could offer some near-term currency protection, even with fears liable to return relatively quickly. Overall, Sterling can edge slightly firmer initially, but is likely to hit tough resistance close to the 1.4790 region against the US dollar. Sterling found support close to 1.4450 against the dollar on Thursday and strengthened steadily during the day with a peak close to 1.47 in New York. Although primarily dollar related, there was also a recovery to 0.8920 against the Euro. There was some corrective pressure following the budget-related losses on Wednesday. There will still be a high degree of concern over the debt situation, especially if there is further speculation over a possible credit-rating downgrade. The latest headline CBI industrial orders data was little changed for April at -57. There was some evidence of stabilisation, but overall sentiment remained very weak. Sterling drifted weaker again the Euro on Friday. The first-quarter GDP report recorded a 1.9% decline after a revised 1.6% decline previously, the weakest performance since 1979 with the sharpest six-month decline on record. Investica http://www.investica.co.uk Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.