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More Profit Taking, More Sterling Gains – 25th August

More Profit Taking, More Sterling Gains

Sterling put in another good performance yesterday and it had nothing to do with any UK economic data or news. The catalyst again yesterday was further profit taking which is happening so smoothly for Sterling.

After a hesitant start yesterday Sterling pushed up during the first half of the London session, peaking in mid-afternoon, but it wasn’t quite enough to take top spot as that accolade went to the NZ Dollar. On average, Sterling went up by 0.5% yesterday – the equivalent to half a US cent and three quarters of a Euro cent.

With no ecostats of any consequence yesterday investors sat on their hands to a degree, waiting for tomorrow’s appearance by Janet Yellen, the Federal Reserve Chairperson. Investors paid scant attention to a slowdown in South African inflation from 6.3% to 6%. They brushed off an uptick in Norwegian unemployment from 4.7% to 4.8% and a slight fall in BBA mortgage approvals went unnoticed. A -3.2% decline in existing (as opposed to new) home sales in the US had no effect on the US Dollar.

Despite many economists looking for some commitment from Ms Yellen, chances are that Ms Yellen will be non-committal in tomorrow’s speech. She has never in the past made predictions about the Federal Open Market Committee other than saying that the decision will be “data-driven”. The likelihood then, that after her speech, investors will settle back into their comfort zone, with the prospect of low rates for longer keeping equity prices buoyed up.

Today’s main ecostat is for US durable goods orders with expectations for orders to have risen by 3.5% overall. Outcomes above or below 3.5% could be expected to send the US Dollar in a similar direction, though not perhaps by far. Other data includes Swiss industrial production, Swedish unemployment, German business confidence, UK retail sales, US jobless claims and the provisional purchasing managers’ index for the US services sector.

There are revised gross domestic product data tomorrow from France, Britain and the United States. German and US consumer confidence measures will also be released.