Sterling hits 4 month low versus the dollar on the back of rising borrowing costs in Spain

A run of positive UK data on Wednesday could not save sterling from falling to its lowest levels for more than four months. Worries over Spain’s rising borrowing costs and banking sector once again caused the value of the greenback to increase as investors headed back to the safe haven dollar. Rates fell by over a cent during the course of the day and hit a low of $1.5524 which means we have seen the pound/dollar cross fall by nearly eight cents in the last three weeks.

With so much talk in recent weeks regarding quantitative easing, Wednesday’s data will have given the pound some much needed breathing space. UK Mortgage Approvals for April came in higher than expected along with UK Consumer Credit which is released by the Bank of England (BoE) and shows the amount of money borrowed by private individuals. The higher figure for both data releases could be seen as positive for the UK economy; it can be seen as growth which in turn will reduce calls for more monetary stimulus from the BoE.

Even with the positive news sterling continued to fall against the dollar as Spain’s borrowing costs reached dangerously high levels, prompting fears that a bailout could be on the cards. For the second day running data released from the U.S came in weaker than expected, today was Pending home sales that came in at -5.5%. As the U.S economy is seen as a sensitive factor to the U.S economy a negative figure can generally cause some volatility to the USD. But with so much uncertainty coming from the UK and Euro-zone today’s data had no impact on the dollars value.

If you need to buy dollars in the next few months contact me for a free consultation to make the most from your currency transfer. To put the recent movements into perspective a £200,000 trade performed today will see you receive around $15,600 less than the same trade performed just three weeks ago. It shows you how quickly things can change and why it is important to protect yourself from adverse movements. Click here to send me a direct email or complete the contact form on the homepage of the blog