Last week was relatively quiet in the US after Presidents Day on Monday, but it did not stop it from being another volatile week for the GBP/USD cross as rates swung on the back of news from the UK and Europe . We started the week in the mid $1.58’s but as the week progressed we saw a sudden 1.5% drop as rates fell back into the $1.56’s before slowly recovering. To put this kind of movement into prospective a £200,000 trade would have seen you receive $4000 less on Wednesday than at the start of the week.
As news of the Greek bailout package came to light the GBP/USD cross began to move towards the highs we saw in October. However, Wednesday morning saw the Pound lose ground against the US Dollar as the Bank of England (BoE) minutes were released. In his last speech Sir Mervyn King announced that the bank would inject a further £50bn into the economy through its Quantitative Easing (QE) programme. However data has shown that two of the nine Monetary Policy Committee (MPC) members actually voted for a £75bn boost.
As soon as the data was released we saw rates drop across the board, the GBP/USD reacted by dropping briefly into the $1.56 level before recovering back into the low $1.57’s. With two MPC members voting for further stimulus it shows that some still believe the UK UK
With the recent gains from the from the Greek bailout and the positive data that has come out of the UK (retail sales and public sector borrowing) it shows how quickly the markets can move against you.
As the week progressed, news from Germany that business confidence was at a 7 month high would have given investors added belief that the Euro-zone could be about to turn a corner. When you have positive news coming from Europe investors tend to leave the Safe Haven status of the Greenback and head back into the bloc currency, this will lead to the dollar losing strength and make it cheaper to purchase.
With many analysts still concerned that the Euro is under threat any talk of a Greek default or a Euro recession could see the pound/dollar start to move back towards $1.50 as investors look to protect themselves with a flight to safety.
With the currency markets being so volatile it is important to keep in touch with your account manager at the Foremost Currency Group to ensure you stay up to speed with the market. If you are buying or selling currency in the next 12 months we can help you make an informed decision to making the most of your currency. Click below to register a free account with us today.
