Sterling lost almost a cent against the dollar today after weaker than forecast UK mortgage numbers a string of positive economic data releases from the U.S. When trading opened this morning the GBP/USD cross was sitting at $1.6880 but by late afternoon the currency pair had slipped back below $1.68 to a low of $1.6795.
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The day did not start well for the pound as UK mortgage approvals missed the forecast target by 3000. It was expected that 45,200 new mortgages be approved in April but with the actual figure coming in at 42,200, means fewer qualified buyers will be entering into the housing market over the coming months.
The GBP/USD exchange rate then dipped further in the afternoon as the U.S posted better than expected durable goods orders and house price index numbers. The durable goods orders helped strengthen the dollar as they are a leading indicator or production in the States, a rise in the number of orders signal that manufactures will be increasing activity in the coming months which in turn will help boost the economy.
So which way will exchange rates move?
The pound is still out performing most of its major counterparts and with that in mind you may think that the GBP/USD rate will continue to rise. The U.S. Federal Reserves (FED) attempts to strengthen the dollar have had little impact and if that continues things could get worse for the greenback. Over the next few months a lot is going to depend on comments made by the Bank of England and FED over future interest rates.
It think that a rise in interest rates will come from the Bank of England before the FED and if that happens it is likely the pound will go from strength to strength. A rise in rates in the UK will make the pound much more attractive to investors and will boost Sterling's value across the board. If the mid-market rate can break through $1.70 then there may be no stopping the pound and I wouldn't be surprised if the GBP/USD cross got close to $1.75.
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