Forex - Pound sets sights on 2 usd level buoyed by strong UK data UPDATE

Forex - Pound sets sights on 2 usd level buoyed by strong UK data UPDATE

	Published : Mon, 16 Apr 2007 11:43 By : Agencies Print this Story

(adds more comment, background)

LONDON (Thomson Financial) - A set of strong UK economic data saw the pound close in on the elusive 2 usd level.

The pound hit an intra-day high of 1.9938 usd after an unexpectedly strong rise in UK factory gate prices this morning which came on the back of news that UK housing market remains buoyant.

'The data adds to the case for a May hike and should prove supportive for the pound, especially in light of the stronger house price data reported overnight,' said Daragh Maher at Calyon.

He believes the market is likely to push for a 2-dollar handle, and that this may also be the catalyst for some overdue correction in the pound's value against the euro.

'Quite how far the rally in the pound can be extended will hinge on tomorrow's inflation data and on Wednesday's minutes of the Bank of England's last rate setting meeting, both of which we expect to prove supportive,' he added.

Data out tomorrow is predicted to show that inflation, as measured by the CPI annual rate, edging up to 2.9 pct in March from 2.8 pct in February, remaining way above the Bank of England's 2.0 pct target. Analysts believe lower retail gas prices will be offset by the rise in petrol prices over the month.

Meanwhile, on Wednesday, the minutes of the BoE's rate setting deliberations are predicted to show a definite slant towards a rate hike, even though the central bank chose to leave interest rates unchanged at the near six-year high of 5.25 pct earlier this month.

The pound has not surpassed the 2 usd mark since 1992 when the UK was forced out of the Exchange Rate Mechanism on Black Wednesday.

Martin Slaney, head of spread betting at GFT Global Markets said this could well prove to be a very significant week for sterling.

'Momentum is certainly with the pound right now and there's every chance that the higher volatility we are likely to see this week will take us above 2 usd,' he said.

sivakumar.sithraputhran@thomson.com

jkm

The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.