Sterling falls ahead of Jackson Hole meeting

Sterling slipped back against the dollar on Thursday ahead of Friday’s meeting at Jackson Hole. Cable fell sharply in the afternoon and hit a low of $1.5803 after reaching a high of $1.5872 earlier in the day, 

On Friday Fed Chairman Ben Bernanke is speaking and there has been growing speculation that policy makers could opt for another round of stimulus, which if implemented could see the dollar fall against a number of currencies.

The past week has seen the GBP/USD cross being driven by events in the states and Thursday saw the dollar claw back some of the ground it had lost to the pound.  In the few days the U.S dollar has benefited from some positive data releases and it seems it has lowered the chances of Mr Bernanke and the FED adding to their QE programme.

With the UK economy still balanced on a knife edge it is quite possible we could see cable move back towards $1.56 if UK data doesn’t improve. With the BoE meeting due to take place next week all eyes will again be focused on Mervyn King and we will wait to see if there is any talk of another interest rate cut.

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Sterling holds its ground against the US dollar

It has been an interesting couple of days for the GBP/USD dollar cross. With little data being released in the UK today the pound has been at the mercy of events elsewhere. 

Sterling held its ground against the U.S dollar on Wednesday despite being close to a three week low against the Euro; cable reached a high of 1.5850 with growing speculation that U.S policymakers are getting closer to more monetary stimulus to boost the U.S economy.

FED chairman is Ben Bernanke is due to speak at the central banks annual meeting in Jackson Hole on Friday, and any indication of further stimulus could see rates push past the $1.59 mark, briefly seen a week ago.

Last week saw sterling gain ground against the dollar following the U.S Congress Budget report, with a rise in tax and spending cuts the potential is there for the U.S economy to slip back into recession in 2013.

There was some positive news for the US today though; figures released on Wednesday afternoon showed that the U.S economy had grown more than forecast for the second quarter. Official figures showed that the economy grew by 1.7% compared to the 1.5% originally predicted, but will all eyes on Fridays meeting it did not have much of an impact on exchange rates.

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GBP/USD weekly overview

Last week saw sustained positive moves for the pound/dollar cross, after the run of poor data we have seen in previous weeks there was finally some good news for the UK economy. In this week’s report we will take a closer look at the events in the UK and U.S that had the greatest impact on sterling and the greenback and how it affected the currency pairing.

 

 It was a solid start to the week as Sterling pushed through the $1.57 barrier for the first time in two weeks, and it was largely thanks to the Euro. Gains made by the troubled single currency prompted investors to leave the safe haven US Dollar and look at riskier alternatives, causing the dollar to weaken and meant rates hit their highest level since the end of July.

Tuesday saw sterling continue to rise after data released showed annual British inflation had unexpectedly increased for the month of July. Rates rallied to a high of $1.5730 on the back of the news but could not sustain the move as retail sales data from the US caused rates to fall. Figures released showed that sales had increased for the first time in four months, dampening the chance of the FED initiating another round of quantitative easing, which meant cable finished the day back at $1.5680.

Last week also saw the release the Bank of England minutes from their meeting at the start of the month; the minutes can often cause some volatility in the market so all eyes were on Mervyn King and other BoE policy makers. But sterling held its ground as the minutes showed a unanimous vote against further monetary stimulus and an interest rate cut.

It wasn’t only the U.S that benefited from positive Retail Sales data last week, Thursday saw figures released for the UK sector and the results were much better than had been predicted. A rise of 0.3% compared to the 0.1% originally forecast and coupled with poor U.S jobless claims and housing data, Sterling hit a fresh high of $1.5739.

Over the past seven days Sterling has gained almost 1% against the dollar and last week’s movements once again show just how unpredictable the currency markets can be.

It is impossible to predict which way rates will move but completing the contact form means you will have all the tools available to make the most from your currency transaction. Click here to complete the contact form and take the next step to making the most from your currency.

Cable weekly overview

The last two weeks have brought us some of the greatest sporting moments the world has ever seen, and with the Olympics now over we wait to see if the UK economy has benefited from this event. Last week saw the volatility in the currency markets continue though as comments from the Bank of England (BoE) and results from UK data releases impacted the performance of the GBP/USD cross.

 The week did not start well for the Pound as it fell against the Dollar; Sterling was down by 0.4% to $1.5584 as investors looked towards Wednesday’s quarterly inflation report, the report is always eagerly anticipated as the BoE give their latest predictions for growth and inflation, giving us an indication that more quantitative easing or a potential interest rate cut could be on the cards.

Positive news followed and sterling edged slightly higher after UK manufacturing and industrial output data released on Tuesday was better than forecast. Although manufacturing output dropped by 2.9% in June it beat expectations the sector would fall by 4.1%. Industrial output also dropped to 2.5% but again beat the predicted 3.4% decline.

So, onto the long awaited inflation report. As outlined in the Euro report above, the BoE forecast that the UK economy will hardly grow for the remainder of 2012 and also cut their projections for future years. As Mervyn King spoke cable reached its highest level for a week as rates pushed towards $1.57.

The gains were short lived as data released on Thursday showed that the U.S trade deficit narrowed for the month of June while the UK trade deficit for the same month hit its highest levels in 15 years. This wiped out the gains seen the previous day and caused the pound/dollar cross to fall by 0.6% which meant rates dropped back to the same level that we saw at the start of the week.

It is widely expected that sterling will continue to fall and by the end of the year we could see rates hit $1.53, that would mean a 2% drop from where we are now and to put that kind of movement into monetary terms it would see you receive $6000.00 less on a £200,000 trade.

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GBP/USD weekly round up

Last week the Pound lost nearly 2 cents against the US Dollar as poor 2^nd quarter growth figures continued to weigh on Sterling, and fears of a Bank of England rate cut on Thursday failed to subside. Poor UK consumer confidence on Tuesday morning was followed by worse than expected Manufacturing data on Wednesday which showed that the sector has now contracted for 3 months in a row, further denting Sterling’s performance, while US data was mixed. Most eyes however were fixed on the FOMC (Federal Open Market Committee) decision on Wednesday evening. At 7:15pm they announced that at least for this month there would be no further quantitative easing or change in the interest rate. While they pointed out that growth was slower than expected and there were more downside risks, they also made sure to point out that the housing market was showing some signs of improvement.

Sterling dropped from 1.57 to 1.56 between market close on Wednesday and opening on Thursday as the BoE and ECB rate decisions came into view. At this point it looked as though the only factor that could help Sterling recover back towards the previous weeks 5 week high against the Greenback would be the ECB announcing some more credible measures to help try and support the single currency as this could sway investors to start seeking more risky assets again. In the end neither central bank cut their interest rate or announced any kind of asset purchase programme which meant we saw the Pound continue to fall until we saw lows in the mid 1.55’s. Friday saw many traders and analysts being caught out but the surprising jump in US non-farm payrolls, a key economic release in the US. It showed that there were 163,000 new jobs created in July, well above the expected 101,000 but more importantly it was the first time since March this year that the actual reading was above forecast, and in the build up to the release the Pound reached a low of 1.5505.

As we know, the FX markets are pretty reactive at the best of times and within 2 hours of the NFP release on Friday increased investor risk appetite saw the Dollar losing ground against both the Pound and the Euro. We think that investor confidence will be the key driver of cable for the next 7-10 days as we are pretty light on the data front from both sides of the Atlantic, and the minutes from Thursday’s Bank of England meeting that we will see a week on Wednesday will be the next big release. These will hopefully give us some insight into how seriously the MPC discussed whether or not to cut the UK interest rate or to expand the asset purchase programme.

With the GBP/USD rate moving so quickly in a single trading day at the moment it is key that you keep in touch and use tools available to make the most from your  transaction. Click here to complete the contact form for a free no obligation quote.