Good afternoon,
Well, what a difference a day makes! Following Fridays positive run Sterling has been unable to sustain its gains against the U.S. dollar with exchange rates falling today by nearly a cent and a half.
When I sat at my desk this morning GBP/USD was sitting around $1.65 but by the middle of the afternoon rates had fallen to a low of $1.6354. So what caused todays movements? With no major data releases out of the UK or the U.S todays post will take a closer look at why the pounds value suddenly dropped.
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Today (Monday) saw the pound loss ground against most of its major counterparts, so it wasn't only the dollar that benefitted during trading today. After a run of weaker than forecast data releases over the past few days some of the gloss has been taken off of sterling's recent positive run.
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It now looks as though expectations have shifted slightly over any upcoming data releases for the UK which in turn have dampened investor demand for the pound. All eyes will be focused on this weeks CPI and PPI releases along with retail sales figures for December, if the numbers are positive we should see the pound claw back some of the ground it has lost over the last 24 hours.
What to look out for.
At the end of the month we will see the FED hold their next meeting and at the top of the agenda will surely be the topic of tapering. Last month FED officials announced their plan to reduce their hefty stimulus programme by $10 billion, but with Fridays extremely poor job numbers showing the U.S. economy may not be as strong as first hoped, it may lead to further cuts to the programme being delayed.
If there is any dovish talk from the FED about the economy or when further cuts will take place there is every chance we could see the dollar weaken and push exchange rates even higher.
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