Analysts at Nomura International advise investors to sell the single currency versus British pound. In their view, fiscal restructuring conducted by Britainís government will be credible and supportive for the national currency.

In addition, UK inflation is likely to remain high during the next few months making the Bank of England raise interest rates earlier than expected. One more factor positive for sterling is the overseas investorsí demand for gilts.

Investors should sell buy pounds around the level of 84.50 British pence per euro with a target of 81 pence stopping above 86.50 pence.

UK inflation accelerated to an 8-month maximum in December as food and fuel prices rose. Consumer prices climbed 3.7% from a year earlier after a 3.3% increase in November. In October 2010 Prime Minister David Cameronís government announced the biggest budget cuts since World War II to curb the record budget deficit.

Nomura also recommended selling the euro versus the Australian dollar as the economic impact of the flooding in the South Pacific nation may be limited.



Chart. Daily EUR/GBP

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