Sterling has gained over a cent against the dollar today on the back of some weak U.S data. Exchange rates climbed from a low of $1.5193 to a high of $1.5369 over the course of trading today but with so much attention on the Bank of England, the next few weeks could well see exchange rates move in either direction. For more information on the live market prices click here.
Sterling's gains today are mainly down the U.S Manufacturing PMI numbers which were released this afternoon. The Manufacturing PMI numbers are a significant indicator of the overall business conditions for the U.S economy and can cause big swings in exchange rates. A result over 50 indicates growth in the sector but with today's data showing a score of only 49.00 means the sector contracted and caused the U.S dollar to weaken.
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There was also some positive news from the UK today but it didn't have the same impact on the markets as the U.S data. The UK's manufacturing numbers were released this morning which showed the sector had grown at its fastest pace for over twelve months. The figures showed that UK manufacturing climbed from 50.2 in April to 51.3 in May which prompted a small rise for Sterling against a number of currencies.
So what next for Sterling/dollar?
On Thursday the Bank of England policy makers will sit down for their monthly meeting. There have been calls in recent weeks for more Quantitative Easing (QE) in the UK and Thursday's meeting to discuss Interest Rates and QE will the last for current Governor Sir Mervyn King. In recent months Sir Mervyn has been one of three MPC members to vote in favor of more stimulus and he will be keen to push through what he believes before handing over the reins to to Mark Carney.
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If no QE is announced on Thursday then we could see sterling claw back some of the ground it has lost against the dollar in recent weeks, but any gains we see for the pound could be short lived as many believe that Mr Carney will look to devalue the pound to aid UK exports when he takes control on the 1st July. In fact one article I read indicated that the pounds value should be cut by a third and that GBP/USD exchange rates could fall back below $1.40!
I personally don't think that will happen but I do believe that we could see exchange rates fall back into the high $1.40's that we witnessed at the start of March. The FX markets move on rumors as much as facts and any indication that more QE was on the cards could see sterling weaken drastically in the coming weeks.
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