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The firm CBI survey and recovery in risk appetite will support Sterling in the short term, but gains are liable to stall close to current levels given the weakening UK fundamentals. 

Sterling found support around 1.98 against the dollar on Wednesday and strengthened to test levels above the 1.99 level in US trading while the UK currency was little changed against the Euro.

There were further tentative gains for high-yield currencies as global stock and credit markets stabilised and this confidence helped provide near-term Sterling support. The UK currency held firm in early Europe on Thursday as high-yield gains accelerated and pushed above the 2.00 level against the dollar as risk appetite remained stronger.

The latest CBI industrial survey reported an increase in the orders component to 9 from -6 the previous month which was a 12-year high for the index. The output and export components rose less strongly, but the data will help maintain near-term confidence in the industrial sector.

Source: Investica

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