A lack of data releases from the UK meant that the pound was at the mercy of events around the globe and in today's post we will take a closer look at sterling's movements and the events that triggered this latest decline.
Over the course of the morning sterling climbed gradually against the dollar as markets reacted to the U.S beige book report from the previous evening and at its highest point mid-market levels reached $1.6040, well short of the $1.6150 we witnessed earlier in the week.
Yesterdays FED beige book (which consists of the 12 Federal Reserve districts) reported that the U.S economy is witnessing some growth, economic activity has picked up speed since November, thanks mainly to an increase in retail sales leading up to Christmas.
However, it was not all good news, the report also detailed that the manufacturing sector was still under performing and the fiscal cliff was still having a knock on affect on investor confidence. Unemployment still remains high on the FEDs agenda, they have indicated that reducing the long-term unemployment rate was a priority.
The gains that sterling made during the morning soon evaporated, US initial jobless claims came in much better than forecast and will have been seen as a major positive by the Federal Reserve. The consensus has been for the numbers to fall against the previous month but figures released actually showed the number of first time claimants had dropped by nearly 30,000 more than forecast.
As the data was released cable dropped by nearly 0.5% to hit a low of $1.5960 for the day. to reach it lowest levels for a number of weeks. With the pound seeming to come under enormous pressure, the potential for rates to carry on declining seems to be growing. Sterling has fallen across the board since last weeks GDP estimates and with the official figures due for release on the 25th we could see cable slip even further from the $1.60 mark.
To put the sudden drop into perspective a $200,000 dollar purchase would have cost you nearly £700 more after the decline and the it once again outlines just how volatile the markets can be and how important timing can be. If you need to buy or sell dollars in the coming months click here to complete the contact form for a free, no-obligation consultation.
