Last week
before the election results were announced, it was fairly uneventful as rates
stayed relatively stable compared to the recent volatility, with rates staying
around the 1.5450 to 1.56 level on the mid-market.
Pound/dollar
rates remained relatively flat throughout the week despite a number of poor
data releases coming from the U.S. Rates held above $1.55 with investors still
concerned over issues surrounding the euro-zone and the potential knock on
effect it could have on the UK
economy.
The dollar
is still seen as the currency of choice for investors despite U.S consumer
prices falling by 0.3% in May. Figures showed that a drop in petrol prices was
behind the biggest monthly fall in over three years, coupled with the rise in
Initial and Continuing Jobless Claims and last Wednesdays fall in Retail Sales
there has been added speculation that further monetary stimulus could be around
the corner to help the faltering U.S economy.
A significant announcement last Thursday evening was from BoE chief Mervyn King caused the pound to fall sharply against a basket of currencies as the market reacted to his speech. Before the announcement pound dollar rates were sitting at $1.5560 but as the UK markets opened on Friday morning there was sharp decline as cable fell back to $1.5475. This recovered through the day however, breaking back into the $1.56’s as markets decided the pre-emptive move was positive for the UK
King
announced that the BoE will launch two new stimulus packages in response to the
UK
and Global economic outlook. The BoE and government will make billions of
pounds of cheap credit available to banks which they can lend to companies.
This weakened the value of sterling making it cheaper to purchase which is why
we saw a drop in rates across the board.
Over the
past couple of weeks we have seen some major movements for the pound/dollar
cross, in the space of a few weeks we saw rates drop by nearly 6.5%, as issues
in the Euro-zone meant investors headed back to the safe haven U.S dollar.
With much
uncertainty continuing to drive exchange rates, contact me today to discuss how
to minimise the impact of adverse movements. If you are not yet registered, click here to send me free enquiry.
