Today has seen GBP/USD exchange rates fluctuate by half a cent throughout trading today with the cross swaying between $1.6750 and $1.67. When I came into the office this morning Sterling/Dollar was sitting just above the $1.67 mark but after better UK manufacturing and mortgage approval data rates climbed to $1.6750, the highest we have seen the cross since the 17th February. However, the gains were short-lived as positive economic data from the U.S quickly saw the dollar claw back the lost ground.
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The UK manufacturing sector was only expected to record a reading of 56.5 but the actual reading came in at 56.9 (a reading over 50 indicates growth in the sector), rising from 56.6 in January and with employment in the sector growing at its fastest pace for nearly three years the pounds value quickly rose across the board.
The good news did not stop there as UK mortgage approvals in January also showed that the UK recovery is back on track. The number of mortgages approved in January was the highest we have seen since 2007, well before the financial crisis hit in 2008. This bodes well for the housing market over the next few months as it means we should see a rise in the number of property completions. The housing market plays a key role for the UK economy and a rise in the sector should help cement the UK economic recovery which in turn will help boost the pounds performance.
So will exchange rates continue to rise?
At the moment it seems there is some scope for GBP/USD exchange rates to keep on climbing, over the past few weeks the U.S economy has not been as consistent as everyone had hoped. The U.S seem to be stuck in a bit of a rut at the moment but if they can build on today's positive Personal Spending and Income numbers we may start see the dollars value increase.
Lets not forget that one of the main reasons we have seen rates climb by over 13% in recent months has been down to the issues in the U.S, if they can put together a run of positive economic data releases and the U.S Federal Reserve continue to cut the on-going stimulus programme there is every chance the dollar will start to fight back.
How far exchange rates will drop is hard to say but there are a number of forecasts saying we could see rates back below $1.60 in the next three to six months.
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