Release of softer than forecast UK....>

EURO-STERLING: Release of softer than forecast UK CPI Wednesday provided EUR/GBP

the lift to take the rate back up to Gbp0.8577, off an earlier low of Gbp0.8537.

The data was seen by some as adding further fuel for a rate cut at January's BOE

MPC announcement(Jan30), the market reacting to this view but others have

suggested this perception could be premature, suggesting that market should wait

for flash PMI data on Jan24. This latter view saw demand for sterling emerge

into the dip, allowed EUR/GBP to ease through the balance of Wednesday's session

to Gbp0.8550, extended to Gbp0.8541 at the Asia open. Asia consolidated this

correction between Gbp0.8541-55, early trade in Europe holding around Gbp0.8550.

Tuesday's rejection away from the topside of its 1.0% 10-dma envelope has seen

the rate ease back toward its 10-dma, which by time has been rising, currently

at Gbp0.8525. However, whilst rate holds above this line seen keep current

underlying tone positive. A break of the 10-dma to expose the base of the 1.0%

envelope, currently at Gbp0.8440. Interim support noted between Gbp0.8525/15

ahead of Gbp0.8500 and Gbp0.8480.