Monday 1 February 2016

The pound recovers some lost ground.


Good morning,

After another volatile week the pound has started well this morning regaining most of the ground it lost to the U.S dollar on Friday.

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GBP/USD has risen from a low of 1.4182 which we saw on Friday afternoon to 1.4311 this morning, meaning the pound has clawed back nearly 0.85% within the first couple of hours of today's session.

GBP/USD graph


Why did GBP/USD fall last week?


The U.S. dollar's value climbed sharply on Friday following a surprise announcement from the Bank of Japan.  The BoJ applied a negative interest rate of -0.1% to some selected current account deposits causing investors to seek the safety of the U.S. dollar.

The move from the BoJ is similar to the action taken by the European Central Bank and will see the central bank charge financial institutions for holding funds with them.

We could also see more action from the BoJ in future as the bank said they are willing to push rates further into negative territory if required.

The dollar was also helped by the latest U.S. Gross Domestic Product (GDP) reading on Friday afternoon which fell pretty much in line with the initial estimates. U.S. GDP grew 0.7% in quarter four and despite missing the forecast figure of 0.8% was close enough to prevent the USD losing any ground.

 

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