Short Sterling – March 2010

Nicole Elliott from Mizuho Corporate Bank at 12/09/09

Comment: The March 2010/red March spread is expected to narrow to 100 basis points, maybe less, as red months rally by more than front ones (though front Sep has done very well over the last week). Rising open interest in most contracts suggests extreme caution as the money market remains seized up (and likely to get a lot worse during the last two weeks of this month). The Bank of England will of course oblige, but the problem remains, QE or no QE. We still feel this contract might edge fractionally higher.

Strategy: Attempt small longs at 99.230; stop below 99.150. Target 99.350 and then 99.450/99.520.