Pound dollar mid-week update and forecasts

Good afternoon, it has been another choppy start to the week for cable and the swings we saw in exchange rates last week have continued. Since the start 2013 sterling has been in free fall against and the current trend shows no signs of improvement.

Positive retail sales data released on Tuesday did see a brief spike in rates, figures showed that sales increased for January by 1.9% compared to January 2012 which is the largest year on year rise since Decemeber 2011. The news saw the GBP/USD cross jump to a high of $1.5792 but sterling could not hold its value over the course of the day and rates quickly started to fall. By the close of business yesterday the pound actually fell by 1% against the dollar to reach a low of $1.5634.

Over in the states talk of spending cuts and tax increases have started to surface again. The temporary package put together President Obama on the 1st of January is due to expire on the 1st March which has led to the President approaching congress to put together another short term package to avoid larger cuts next month. The proposal was quickly rejeceted and the longer it drags on the more likley we are to see the dollar come under pressure, lasts weeks poor GDP figures for Q4 were put down to the 'Fiscal Cliff' and if a solution there is chance rates could start to push higher.

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Tomorrow is quite a big day in terms of data releases in the UK which could give us an indication of things to come. The Bank of England are holding their monthly meeting and if they opt for another round of quantitative easing it is possible we could see rates fall even further. If they don’t we might see some support for the pound which could see rates start to creep back up again. The UK economy seems to be the centre of attention at the moment and in my opinion I think it is unlikely we will see rates push back towards the $1.60 mark any time soon. In fact one of the forecasts we received from our brokers recently indicated that rates could fall back towards $1.53 within the next 12 months

With so much volatility surrounding the currency markets at the moment the use of Stop Loss and Limit Orders has increased massivly, they can protect you against a falling market but also help target a rate that might not be currently available. Below is a link that will give you some more information regarding the different types of contract I can offer.  

Types of currency contract 

However, one thing I would recommend is not to get caught trying chase your losses; it can be a very dangerous game especially if you are looking to move large volumes of currency. What I have tried to explain to clients over the last few weeks is that if your purchase is in budget then look at fixing your rate of exchange, even if you don’t need the money straight away. 

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So if you are looking at buying or selling dollars, for personal or business use in the coming months don't leave it to chance, the way the currency markets have been moving for the last few weeks could end up costing you thousands. If you haven't done so already click here for a free, no obligation consultation.