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Sterling Climbs as Markets Hold Narrow Range- Swissie Under Pressure

By , Currency Strategist
19 October 2011 16:48 GMT

Daily Winners and Losers

Sterling_Climbs_as_Markets_Hold_Narrow_Range-_Swissie_Under_Pressure_body_Picture_2.png, Sterling Climbs as Markets Hold Narrow Range- Swissie Under Pressure

Sterling_Climbs_as_Markets_Hold_Narrow_Range-_Swissie_Under_Pressure_body_Picture_3.png, Sterling Climbs as Markets Hold Narrow Range- Swissie Under Pressure

Sterling_Climbs_as_Markets_Hold_Narrow_Range-_Swissie_Under_Pressure_body_Picture_4.png, Sterling Climbs as Markets Hold Narrow Range- Swissie Under Pressure

The British pound tops the performance chart mid-day in New York with an advance of 0.57% against a weaker dollar. Minutes from the latest Bank of England policy meeting revealed that the move to increase the bond purchases from £200 billion to £275 billion was unanimous suggesting that member see an increased risk for the economic slowdown to gather pace. The minutes also showed that central bank officials remain concerned about possibly undershooting the medium term target of 2% for inflation even as CPI matched record highs at 5.2% yesterday. Board members may also be trying to shield the UK from possible contagion as the European debt crisis approaches critical mass. In the interim, these threats and injections of liquidity are likely to weigh on the pound in the short-to-medium term.

The sterling advanced nonetheless, with the GBP/USD pair breaking above interim resistance at 1.0210 in overnight trade. The longer-term outlook for the pound remains weighted to the downside despite the recent rally with interim support targets eyed at the 61.8% Fibonacci extension taken from the October 6th and 11th crests at the 1.58-figure, 1.5750, and the 38.2% extension at the 1.57-handle. Topside resistance holds at 1.5840 backed by the 76.4% at 1.5860 and the 1.59-figure. Investors look to the economic docket tomorrow with key retail sales data on tap from the UK. Consensus estimates call for a pick-up in overall sales in September after a slight contraction the previous month.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

1.6059

50-Day SMA

1.5919

20-Day SMA

1.5600

2011 GBP High

1.6745

Upcoming Events

Date

GMT

Release

Expected

Previous

10/20

8:30

Retail Sales ex Auto Fuel (MoM) (SEP)

0.2%

-0.1%

10/20

8:30

Retail Sales ex Auto Fuel (YoY) (SEP)

0.6%

-0.1%

10/20

8:30

Retail Sales inc Auto Fuel (MoM) (SEP)

0.0%

-0.2%

10/20

8:30

Retail Sales inc Auto Fuel (YoY) (SEP)

0.6%

0.0%

Sterling_Climbs_as_Markets_Hold_Narrow_Range-_Swissie_Under_Pressure_body_Picture_5.png, Sterling Climbs as Markets Hold Narrow Range- Swissie Under Pressure

Sterling_Climbs_as_Markets_Hold_Narrow_Range-_Swissie_Under_Pressure_body_Picture_6.png, Sterling Climbs as Markets Hold Narrow Range- Swissie Under Pressure

The Swiss franc is the worst performer against the greenback with the USD/CHF pair falling nearly 0.3% mid-way through the session. The swissie has largely remained under the radar since the Swiss National Bank decided to effectively peg the EUR/CHF exchange rate at 1.20 back in September. Speculation that the SNB will move to raise the price floor diminished today when research from the central bank cited that raising the peg is unlikely with the bank noting it would be extremely difficult to maintain. Although the news has not been reflected in today’s price action, it’s worth noting that the softer tone from the SNB may see haven flows return to the swissie should market sentiment turn.

The USD/CHF pair now holds just below interim resistance at 0.9020 with subsequent ceiling eyed at 0.9040 and 0.9080. Support rests lower at the 23.6% extension at 0.8950 followed by the 38.2% extension at the 0.89-figure and 0.8880. Investors will be eyeing data out of Switzerland overnight with the September trade balance figures on tap.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

0.8386

50-Day SMA

0.8584

20-Day SMA

0.9058

2011 CHF High

0.7079

Upcoming Events

Date

GMT

Release

Expected

Previous

10/20

6:00

Trade Balance (Swiss franc) (SEP)

-

0.81B

10/20

6:00

Exports (MoM) (SEP)

-

-7.0%

10/20

6:00

Imports (MoM) (SEP)

-

0.9%

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19 October 2011 16:48 GMT