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Sterling flat, vulnerable to risk of easing hints from Carney

Sterling flat, vulnerable to risk of easing hints from Carney

Sterling hovered near multi-month lows against the dollar and euro on Thursday, with investors wary ahead of a testimony from incoming Bank of England governor Mark Carney later in the session. Any hints of more aggressive policy easing to support the economy from Carney, could push the pound lower, analysts said. The euro was steady against the pound, with eyes in mainland Europe firmly fixed on a potentially pivotal European Central Bank policy meeting. The single currency has retreated since hitting a 15-month high last week, but was still up more than 6 percent on the year versus sterling.

Meanwhile, the Greek Finance Minister, Yannis Stournaras said the strength of the Euro is a concern even as its current level shows a return in confidence in the 17-nation currency. French President Francois Hollande called for government leaders to steer the Euro’s exchange rate. The currency rose to a 14-month peak against the Dollar this month and the highest in almost three years against the yen, making it harder for exporters to sell goods abroad. German Chancellor Angela Merkel’s government yesterday dismissed calls by French President Francois Hollande to steer the Euro’s exchange rate, saying currencies should be determined by the market and not managed.

On the FX markets, shorter-dated EUR/GBP implied vols were better bid on Wednesday and the 1-month implieds were trading at its highest level since mid-June 2012, which comes ahead of the MPC meeting tomorrow and more importantly Carney’s appearance in-front of the TSC (Treasury Select Committee). However, GBP/USD traded steady for much of the session, in close proximity to a large intraday expiry at 1.5630 as safe-haven related flows offset risk off sentiment. In terms of technical levels, supports are seen at 1.5578/67 and then at 1.5550. On the other hand, resistance levels are seen at 1.5800/05/50 and then at the 21DMA line at 1.5872.

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