Last week the Pound lost
nearly 2 cents against the US Dollar as poor 2nd 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.
