Pound Spread Betting Market Rises After Less Dovish BoE Report

This morning’s slightly less dovish outlook from the Bank of England has seen the Pound continue to push higher.

Yesterday’s figures from the National Institute for Economic and Social Research (NIESR) suggested that the UK economy likely grew 0.5% in the 3 months to October. Given this, and the better than expected Q3 GDP figures, it would have been somewhat surprising if the Bank hadn’t raised its short term forecasts for UK growth and inflation.

Combined with the rapid rise in commodity spreads over the past few months, which has been exacerbated by last week’s Fed quantitative easing, the inflation outlook is set to remain firmly tilted to the upside in the near term. This would make any resumption of further UK easing fraught with difficulty.

The forthcoming VAT rate hike in January will only underpin the upward price pressures facing the UK economy and probably isolate Adam Posen’s view of further QE in the short term.

The Pound looks set to test its 200 day moving average support against the Euro around the £0.8570/75 area. A close below this level will ratchet up the downward pressure on the single currency and target a move towards £0.8500.

The single currency will also find it difficult if the problems currently being experienced by Portugal and Ireland continue to deteriorate.

This morning’s 2020 €686m Portuguese bond auction illustrates the problems quite starkly with a bid to cover ratio of 2.1, falling from the previous 4.9, on a yield of 6.8% against a previous 6.24%.

On the FX spread betting market, the Pound’s direction is less clear against the US Dollar, given the recent strength in the US currency, however it should find support around the overnight and last week’s lows at $1.5960 with further support at $1.5880.

Spread betting, CFDs and FX are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.

The above content does not constitute investment advice. Neither CMC Markets nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the above.

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Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.

'Pound Spread Betting Market Rises After Less Dovish BoE Report', Feature by D. Jones, last update: 10-Nov-10

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