Sterling falls towards $1.55 over Spanish banking fears

Despite some positive news from the UK on Tuesday, cable slipped back towards $1.55 as mounting worries over Spain’s banking sector caused investors to seek the safety of the U.S dollar. Rates fell from $1.5715 at the start of the day to $1.5617 at the time of writing, taking us close to a seven cent drop in a matter of weeks.

Unexpectedly, Retail Sales Figures in May came in higher than forecast this morning (Tuesday) but did little to boost the pounds value against the greenback. Figures indicated that 21% of retailers reported an increase in sales compared to this time last year.

It seems even a run of positive data from the UK will not see sterling strengthen against the dollar, as events from the Euro-zone continue to reduce investor appetite for riskier currencies. In yesterdays blog I mentioned that JP Morgan had revised there forecasts and were now predicting that the GBP/USD will drop to $1.54 by the middle of the year and with nearly three weeks until the Greek elections I think the pound/dollar cross will continue to come under pressure.

In the US, consumer confidence fell to its lowest levels in eight months as fears over the global economy caused unrest. The Consumer Confidence Index fell from 68.7 in April to 64.9 its lowest levels since October 2011. Consumer spending currently makes up around 70% of the U.S economy activity so the figures are watched closely, but even with the announcement the dollar continued to gain strength over the course of the day.

With so many problems hanging over the UK and Euro-zone I believe it is likely we will see rates fall further over the next few weeks. To protect you from adverse market movements click here to send me a direct email or complete the contact form on the homepage of the blog.