Pound Dollar Rate Forecast weekly overview

At the start of the week a lack of data releases from the US prompted a more stable feeling to the market compared to recent weeks with rates sitting around the $1.58 Interbank mark.

We did see a small recovery for the dollar on Tuesday on the back of an announcement that Greece had their credit rating downgraded, and the CBI data release in the UK which showed Britain’s service sector had weakened. This prompted a flight to safety as investors left the UK and single currency.

Tuesdays CBI data release has shown Britain’s service sector has weakened, this covered the three months ending the 31st January. In the report consumer and business services saw a drop in activity, but in both cases it was not as much as first feared.

Towards the end of the week we saw rates hit their highest since November 2011. This was mainly down to GBP strength rather than dollar weakness, with Sterling shaking off slightly weaker-than-expected UK manufacturing data, and reduced bets on further quantitative easing.

In recent weeks we have seen better data coming out of the UK, and as a result it has shifted expectations that the Bank of England will pump more money into the economy to stimulate growth. BoE governor Mervyn King has said the bank will be guided by upcoming data when deciding whether to print more money.

With Fridays mornings Purchasing Managers' Index (PMI) for construction showing a rise to 54.3, up from 51.4 in January, it was more good news for the pound. Strength in the construction industry could help the UK avoid a double-dip recession, after the economy shrank during the last three months of 2011.

With the sudden move in rates it is another indication of just how volatile the markets can be. Last week the interbank was down in the $1.56 region, which means we have seen rates move by nearly 2% in the last seven days.

With forecasts still showing a mixed feeling about the GBP/USD cross it’s important to make sure you have the necessary precautions in place. Depending on where you look you could see predictions for pound/dollar exchange rates ranging from 1.55 to 1.59 for the next 3 months.  A £200,000 trade could mean a difference of 8,000 dollars. Click here to send me a no obligation email or complete the contact form on the home page of the blog.