After last Thursday's highs which saw GBP/USD hit a four month high ($1.5679) Sterling slipped back slightly on Friday following the positive U.S job report released in the afternoon. The report showed that 175,000 jobs were created in May, 5,000 more than originally forecast which brought exchange rates back down to just below $1.55. For more information on live exchange rates click here.
Today (Monday) has seen exchange rates sit within a half point range with the high for Sterling/dollar coming in at $1.5570. It has been a relatively quite start to the week with no real data releases of note coming out of the UK or the U.S. Tomorrow may bring some volatility to the FX markets as we see the UK Industrial and Manufacturing figures for May along with the latest GDP estimate.
Following the positive Services Sector numbers last week (which I mentioned in my last post) there was some more encouraging news for the UK this morning as a report from Ernst & Young (one of the UK's top economic forecasters) showed that consumers in the UK are set to spend more in the coming months.
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This latest report once again shows that the UK maybe on the road to recovery and may just change the mindset of those looking into ways they can boost the UK economy. Talk has been a lot of talk recently that the Bank of England (BoE) will look to extend its existing Quantitative Easing (QE) program when Mark Carney takes over the central bank. If policy makers were to opt for more stimulus we can expect to see Sterling's value fall over the coming months which in turn will drive down exchange rates.
The recent upturn in the UK economy could just give the pound some much needed breathing space as it wasn't that long ago that Sterling/dollar was down at $1.48. However, even if the BoE leave QE as it is there are other avenues they could go down to ensure the UK does not slip towards another recession.
Some of the forecasts I receive on a daily basis are still expecting GBP/USD exchange rates to fall as low as $1.47 in the next three months, this is only one opinion and as I have often said the currency markets are almost impossible to try and predict. If the UK continues to perform in the coming weeks and if the U.S keep their existing QE program at it's current level there is every change we could see exchange rates push back towards $1.60.
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