The British pound moved higher vis--vis the U.S. dollar today as cable tested offers around the US$ 1.9995 level and was supported around the $1.9880 level. Technically, todays intraday high and low were right around the 38.2% and 50.0% retracements of the move from $1.9360 to $2.0395. CML reported U.K. gross mortgage lending fell 8% y/y in Q1 and will likely weaken further. Sterling gained some ground on news that Royal Bank of Scotland Group Plc is preparing a rights issue to replenish up to ₤12 billion in capital reserves. Sterling also continues to benefit from reports that Bank of England may swap gilts for mortgage-backed securities and from this weeks report that sterling Libor may have been fixed at artificially low levels. BoE Chief Economist Bean reported that the decline in sterlings effective exchange rate since August is equivalent to about a 3% decline in the repo rate. Cable bids are cited around the US$ 1.9605/ 1.9505 levels. The euro moved lower vis--vis the British pound as the single currency tested bids around the ₤0.7885 level and was capped around the ₤0.7990 level.
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