Wednesday saw sterling shrug off some poor data to hold its
ground against the U.S dollar. Rates held around the mid $1.55 mark despite a surprise
drop in UK manufacturing output for April, but analysts still fear rates could
fall away after this weekends Greek elections.
The manufacturing data released this morning (Wednesday) will
have fuelled speculation that more quantitative easing is around the corner.
Factory output fell by 0.7% in April following a rise of 0.9% in March and was
worse than originally forecast, potentially impacting growth in the UK for the
second quarter which may prompt Bank of England (BoE) policymakers to consider
further stimulus through its asset purchasing scheme.
If the Bank of England add to the £325 billion already
pumped into the UK
economy sterling could drop against a number of currencies as the value of the
pound falls. Investors will see it as a negative move and would see the U.S
dollar as a safer option which will drive GBP/USD dollar rates down.
We may see the dollar gain strength over the coming days as
the problems surrounding Greece
reach a crossroads. This weekend sees the results of the Greek elections and a
victory for the anti-bailout party could cause chaos, it could prompt a
Euro-zone exit for the Greeks and leave investors flocking back to the safe
haven greenback.
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