STERLING has been having a storming week and traders are beginning to reconsider their uber-bearish view of the pound. Yesterday’s record inflation data – the annual consumer prices index leapt to 2.9 per cent – is likely to be followed by a period of high inflation. This is forecast to put pressure on the Monetary Policy Committee to raise rates earlier than it, or the markets, would have expected or even liked. In terms of sterling-dollar, is it worth considering a target just below the pair’s 12-month high of 1.7050 and a stop loss at 1.5750? ETX Capital offers a spread of $1.6319-$1.6322.
While the UK continues to enjoy a string of positive data, the Eurozone is suffering from sovereign debt woes. It becomes increasingly difficult to believe we won’t see further unwinding of euro-sterling. The move below £0.8830 also saw key technical levels fall and the 2009 lows of £0.8400 are now being eyed. The current IG Index price is £0.8724-£0.8727.
It’s not just sterling that will benefit from the Eurozone’s sovereign debt troubles. Improving prospects in Eastern Europe and the success of IMF assistance have been favourable for Hungary, which is expected to outperform relative to the single currency area.
Foreign exchange traders could therefore look to take a bearish position on euro-Hungarian forint. Currencies Direct is offering a forward price of Ft278.23.
The Norwegian central bank was one of the first to raise interest rates and this growing rate differential should serve its currency, the krone, well over the coming months. If you are searching for extra performance, you could sell Japanese yen-Norwegian krone.
Not only is Japan predicted to perform poorly as it wallows in deflation, interest rates are extremely low at 0.1 per cent and the Bank of Japan recently loosened monetary policy. This indicates that rates will not be tightened any time soon. Currencies Direct has a forward price of Kr16.