In terms of data it is going to be a relatively quite week and todays loses could be down to a couple of factors. Around 2pm (BST) the latest IBD/TIPP Economic Optimism figures were releases in the U.S with the numbers coming in much lower than forecast at 45.1. The IBD/TIPP Economic Optimism survey is conducted across the States by one thousand adults and asks them for their economic outlook for the next two quarters and their opinion on the FED's policies. If the reading comes in above 50 it indicates optimism, while a reading under 50 will show pessimism.
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In one of my posts last week I mentioned we witnessed a change in risk appetite and that investors were leaving the safe-haven of the dollar and looking into riskier assets, as today's figures from the states were negative it may have triggered investors to seek the safety of the dollar once more and strengthen the greenback causing exchange rates to fall.
The decline in today's rates could also be down to the markets pricing in what the Bank of England (BoE) may do when they meet on Thursday. The BoE policymakers are due to meet for their monthly meeting to discuss interest rates and Quantitative easing (QE). There have been some calls for the BoE to add to the £375 billion they have already pumped into the UK economy, if they were to look at another round of QE it would devalue the pound and could cause exchange rates to fall.
The FX markets move on rumours as much as fact so if there is chance of further stimulus you often see the exchange rates move in the run up to the announcement. In my opinion I think it is unlikely we will see a rate cut or more QE from the BoE on Thursday and if that was the case I wouldn't be surprised to see the pound claw back todays fall.
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