Good afternoon,
In today's post I will give a brief overview of events that have impacted the GBP/USD cross over the last 5 days. Since the start of the year we have seen a massive decline in exchange rates across the board where sterling has been involved. This week I am glad to report there has been a slight upturn in the pounds fortunes as cable has gained nearly 2.2% since Tuesday.
At the start of the week sterling slumped to a fresh low of $1.4848 before recovering today (Friday) to reach a high of $1.5172. Having access to range of Forecasts I was interested to see that one broker is predicting we could see exchange rates move back towards $1.56 in the next three months and $1.53 in the next twelve. This to me seems hard to justify especially considering all that has happened to the UK over the last few months which has Britain facing yet another recession. Earlier this week I posted that there is talk that we could see cable fall back towards $1.40 by the end of the year so with such a wide spread across the market it is almost impossible to try and gauge where rates will be a few months from now.
So what has caused this weeks gains?
I have been a little surprised to see the gains sterling has made against the dollar over the last few days. At the start of the week the UK suffered from poor Manufacturing figures which showed that output had fallen by 1.5% in January which left exchange rates sitting around the mid $1.48's. We also saw some excellent figures come out of the U.S in the form of Retail sales and Factory Output but despite the positive news from the U.S exchange rates started to climb.
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The main reason for the gains seems to be down to some positive comments from Sir Mervyn King. The Bank of England Governor said that a UK economic recovery is in sight and that the pound has fallen enough in recent months. It has been sometime since Sir Mervyn has spoken positively about the situation in Britain and comes as a bit of shock considering that it was only last month that he voted for more quantitative easing. It seems that these latest comments have lent some much needed support to sterling but the positive moves for exchange rates could be short lived.
One thing the last week has proven is that getting the timing right on your currency trade is so important. To put this weeks move into monetary terms a £200,000 trade at the start of the week would have seen you receive nearly $6500 less than on the same trade put through today.
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