With exchange rates falling to $1.5011 yesterday (Wednesday) Sterling managed to claw back some ground against the U.S dollar today to reach a high of $1.5218, the highest we have seen the cross since the 20th May. For more information on current rates of exchange click here.
With little data coming out of the UK this week there has been a lot of attention on the U.S and their economy. Today (Thursday) saw the States release Gross Domestic Product Price Index and Gross Domestic Product Annualised figures for Quarter One this year along with their latest jobless numbers.
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The Gross Domestic Product Price Index tries to gauge the change in prices for services and goods while the Gross Domestic Product Annualised figures show the monetary value of goods and services over a set period. The figures can have a big impact on the value of the dollar, if the reading comes in on or above forecast then you will see the dollars value increase but if the reading is negative or under the forecast then you can see the dollars value decrease.
This is exactly what we saw this afternoon, as soon as the figures were released the dollar started to lose ground against the pound pushing exchange rates up towards a 10 day high. The Gross Domestic Product Price Index figures came in as expected at 1.2% while the Gross Domestic Product Annualised figures came in slightly under forecast at 2.4%.
Although the Annualised figures would have attributed to the dollar losing strength the main reason we saw rates move up today was down to the jobless numbers, Initial Jobless Claims in May increased by nearly 10,000 to 354,000 compared to figures released in April when it had actually been predicted that the number would fall by nearly 4,000.
So what can we expect in the coming weeks?
As I have said time and time again it is impossible to and predict which way the currency markets will move. One thing I can be sure of is that there will be a lot of attention on the Bank of England over the next few weeks. With Mark Carney due to take over from Sir Mervyn King at the beginning of July there has been talk that the new Governor will look to increase stimulus in the UK and devalue the pound.
In fact, one report I read this morning said we could see Mr Carney try and reduce Sterling's value by around 15% in an attempt to boost UK exports which would cause GBP/USD exchange rates fall towards $1.37. Although I don't think Mr Carney will take some drastic steps it does leave the door open for exchange rates to fall below the $1.48 we saw at the start of March.
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