While the pound sterling is close to our previous bullish target price, the appreciation of the British currency benefit from significant support in august that might lead it toward USD 1.60 in the coming weeks.

Base borrowing rate in the UK is stagnating at 0.5% since March 2009, its lowest level ever, and the Governor of the Bank of England (BoE), Mervyn King, has warned a new rate cut would be counterproductive.

This announcement helped the pound and overshadowed the expected lowering of growth forecasts and inflation. The news was confirmed during the minutes of the BoE, mid-August. Indeed, at its monthly meeting earlier this month, the Monetary Policy Committee has opted unanimously for the status quo, not only for the rate but also for the program of asset purchases, which reached 375 billion pounds in July.

The same day, the health of the British economy reassured traders because of a surprising fall in unemployment, before retail sales, which were sharply revised upward in June, disappointed the next day. In addition, these indicators suggest that the growth rate could be revised up for the second estimates expected on August 24.

Finally, speculation about a third quantitative easing of the Federal Reserve and hopes of the next ECB intervention in the bond market maintain risk appetite and the strength of the pound.

Technically, the exchange rate has recorded its highest daily close since May 21 and now seems determined to cross over the next key level at USD 1.5927. So we keep our long positions and the realization of such a scenario would allow more ambitious target at 1.60.