After what seems like weeks of negativity for the sterling/dollar cross there were finally some positive moves this afternoon. Over the course of trading today exchange rates have increased by over 1% as the pound responded to some flat data from the U.S, at the time of writing this post the mid-market rate has broken through the $1.50 barrier to reach a high of $1.5092.
After yesterdays positive U.S retail sales figures (which saw spending increase by 1.1% for the month of February) U.S initial jobless claims fell by 18,000 to help ease the burden on the economy. I don't think this the reduced number would have come as much of a surprise following the excellent jobs data we saw come out of the states last week.
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Today also saw the release of the U.S Producer Price Index (PPI) for February, which came in exactly as forecast at 1.7%. The PPI measures the changes in prices of commodities from producers and a high reading can have a positive impact on the greenback.
Markets will have been buoyed by the retail figures but with today's data not causing any alarms it seem as though the wind has been taken out the dollars sails for the time being. I don't think today's gains for sterling mean we have turned the corner, I still believe the pound will come under increasing pressure over the next few weeks as we build up to the release of Aprils Gross Domestic Product (GDP) Figures.
If Aprils initial reading shows the UK economy has contracted in the first quarter it will leave the UK in a triple-dip recession. If that happens (which looks increasingly likely) we can expect sterling to suffer against a basket of currencies and I wouldn't be surprised to see exchange rates tumble. As I have mentioned in previous posts it is widely tipped that the GBP/USD cross could fall as low as $1.40 by the end of the year.
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