The cable could get above 1.50 psychological level again with a triggered wave of market optimism by BOC brighter economic assessment of the current after leaving the interest rate unchanged today which refer to a coming tightening action and today RBA rising the interest rate by another .25% which increased the investors' risk appetite weakening the greenback but the worries about the worsening economic situation in UK is still containing the market sentiment weighing on the British pound which slumped to 1.4785 versus the greenback earlier this week with accumulating pressure has been triggered by a huge bargain between AIG and the British insurance company Prudential for buying the Asian parts of the first for about 35$ Bln. The cable has already started the week in weakness after news of a bailing out plan from France and Germany to rescue the Greek exacerbating debt situation during the weekend which can push up the EURGBP but until now no new change of the European situation concerning this subject waiting for a change from Greece in the coming 30 days as what has been announced a week earlier but it looks widely unsustainable to see the Greek deficit to growth ratio above 12% while it is required now to be back below 3% by 2012 and it is widely around 6% in Europe at the current struggling growth rates which resulted from the credit crisis even the ECB could not stop any of its accommodative easing actions worrying about the current nascent recovery until now which can put more pressure on the reforming plans in Greece and putting pressure on the single currency while the case is exacerbating further in UK with high inflation rates with UK posting its first net borrowing deficit month since the beginning of 1993 with the public sector borrowing in Jan reaching 4.3 B Stg while the market was waiting for covering 2.8 B Stg of the debt which can bring its budget deficit ratio to GDP above 12% like Greece otherwise it looks building up in UK and the efforts are emerging for staving off it in Greece. From another side, the worries about the political future in UK have increased depressing the British pound by the preliminary elections as the conservatives' opposition party has lost its strong leading versus the labor ruling party on the recent polls results in the weekend. Recently, The cable has been very vulnerable to the downside after forming a lower peak below 1.584 resistance closing last week around
1.525 but it has started this week below 1.52 and with the breaking 1.51, the selling momentum has increased causing a free falling to 1.4785 with the beginning of this week. The cable is having now a far away main supporting level at 1.44 whereas the bottom of last April has been formed but with this recent sever action with no containing even to keep it trading above 1.5 psychological level, the pair can face further pressure to test 1.46 in the near term.God willing, it is important today to wait for Feb Service PMI to be
52 from 52.5 in Jan in the Euro zone and to be 54.9 from 54.5 in UK while it is important to watch US ISM non-manufacturing index of Feb which is waited to be 52.8 from 52.2 in Jan and Feb US ADP employment which is expected to show adding 10k from losing 22k in January report ahead of the US labor report release of February which is expected to show the same losing of Jan by 20k and rising of the unemployment rate to 9.8% from 9.7%.Best wishes
FX Consultant Walid Salah El Din E-Mail: snipped-for-privacy@fx-recommends.com