Today has seen another day off agressive purchasing of the British Pound on the renewed outlook for improved and sustained growth prospects moving into 2011. Speculators are scaling back expectations of QE in Q1 next year and with the BoE now adopting a wait and see aproach we will most probably see avoidance of more stimulus if the UK economy continues to tick along at an acceptable pace.

The British pound is at an 8 week high against the Euro ahead of the Q3 GDP figure from the Eurozone tomorrow. The speed and extent of the rally can be attributed to concern over tomorrows release and subsidence of fears of QE in the UK in the short term. The direction for the pound at the moment looks set to continue as this retracement shows that the pound was clearly backed into an oversold state in the past few weeks. The focus has now switched back towards the European debt crisis and a move back towards 1.20 is looking increasingly likely in the next few days. “With the debt on Irish loans at over 8% the situation is becoming untenable, the cost of servicing the debt alone is greater than the whole Irish GDP and they are very close to either a Greek style bailout or bankrupcy before Christmas,” said senior Forex analyst Samuel Allen at Torfx.

GBP/USD has been fairly flat on the day with direction yet to be defined. We are still in a clear technical uptrend yet yesterday were calling for retracement and further strengthening of the USD. We at the moment maintain this stance and expect the market to slip back into the 1.50’s before we see a surge towards the mid 1.60’s.

Best Regards
Luke Zorab

Torfx Currency Dealer
(01736) 335285

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