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Sterling Supported Despite UK Rejection of EU Plan
The UK decided against joining the EU in agreeing to tighter deficit and debt restrictions. There have scathing criticisms of UK PM David Cameron from a variety of media sources for his rejectionist policy. However, markets have reacted positively to both sterling and gilts. After moving below its initial support level at 1.5560 from last week's low the GBP/USD found a bid. Gilts were also stronger with the 10-year yield falling to 2.12%. 1-week ago the 10-year was yielding 2.33%.
Today we'll get UK CPI data which is expected to fall to 4.8% from 5.0%. A confirmation of declining inflationary pressures would confirm the BoE's forecast and lend additional support to more QE from the BoE.
The EUR/GBP is testing the bottom of its consolidation pattern from Q2 which comes in at 0.8450. The next support below here is at 0.8390 from the chart pattern from October 2008 low. Resistance is found at 0.8620 from the December high.
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