GBP/USD weekly overiew

It was another choppy week for the pound/dollar cross as data in the U.S and UK led to big swings in the currency markets. Federal Reserve chief Ben Bernanke expressed a note of caution on the U.S economy early on in the week which pushed rates to their highest levels since November.

Mr Bernanke has indicated that more quantitative easing could be on the horizon if the U.S economy continues to come under increasing pressure. Further monetary stimulus would flood the market and make the U.S. dollar cheaper to purchase. This sent the GBP/USD cross towards the $1.60 mark and peaked at 1.5999.

These highs were short lived as sterling dropped by 0.7% against the dollar mid week. There is still a black cloud hovering over the UK economy which was reflected in the news that British house prices had dropped in March, their sharpest fall for over two years. UK mortgage approvals also unexpectedly fell for the month of February and are another reminder that the UK economy is still a long way from recovering.

However, with Friday bringing a close to the month, the quarter and financial year pound/dollar rates hit their highest levels for four months and broke the $1.60 barrier.

Sterling rose to $1.6034, it highest levels since November 14, largely thanks to a weaker dollar due to end of month and quarter rebalancing.

"The out performance in U.S. equities of late means portfolio rebalancing at month and quarter-end points to a weaker dollar. Everyone is looking for a softer dollar today and that's helped sterling get back above $1.60," said Ankita Dudani, currency strategist at RBS.

To put the movements into perspective, we have seen a 1.2% difference from the lows of the week to the high. This is a difference of $3700 on a £200,000 trade and shows how important it is to get the timing right for your currency exchange.

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