A lack of data in the UK last
week meant that sterling was at the mercy of events elsewhere. So far this year
we have seen the pound fall by nearly 4% against the dollar, so what has
happened to cable over the last 7 days, and will the trend continue? In this
week’s report we will take a closer look at the key factors which impacted the
GBP/USD cross.
The start of last week saw the
trend continue as rates fell by nearly 0.8%. But in a turn of events in the
latter part of the week cable recovered and climbed 1.3% to reach a high of
$1.5876. However, the gains were short lived as Friday saw sterling lose nearly
a point due to poor UK manufacturing data and solid
non-farm payroll data from the states, which came in only 3000 under what had
been forecast.
The main reason for the sudden
mid-week gain was the surprise announcement that the U.S economy had shrunk in
the final quarter of 2012. Initial estimates indicated that the world’s largest
economy contracted by 0.1% when analysts had been expecting 1.1% growth. It will
be a bitter blow if the figures are confirmed and will add to pressure on the
U.S Federal Reserve (FED) to do more to help boost the U.S economy. More
quantitative easing could now be on the cards and if the FED opts to go down
that road again it could potentially mean the dollar weakening against a basket
of currencies.
Quarter four in the states was
dominated by talk of the Fiscal Cliff and although avoided by a last minute deal
put together by President Obama the fear created by the prospect of huge
spending cuts and tax increases seem to have had a knock on effect for
businesses and consumer confidence.
Part of the fiscal package
included an increase in tax payments for the highest earners in the states and
the expiry of a payroll tax holiday for all U.S employees. Economists believe
this could hinder the U.S economy for quarter one of 2013 and if figures
released in April show a contraction it will mean the U.S has entered into
recession for the first time since 2009.
If the U.S were to head back into
recession we could see some major swings in the currency markets over the next
couple of months, With the UK teetering on the edge of a triple dip recession
along with the threat of losing its prized AAA credited rating the volatility we
have seen over recent weeks shows no sign of letting up.
The swings we have seen in trading
over the last week once again show just how important it is to stay in touch To put last week’s movements into monetary terms
a £200,000 trade into dollars would have seen you receive nearly $4000 less had
you brought on Tuesday rather than Friday. As a currency broker I have a range
of currency contracts to help you make the most of your currency transfer, so if
you haven’t done so already click here for a free, no
obligation consultation.
