Sterling recovered slightly during trading today with the GBP/USD cross climbing from $1.6815 to $1.6844. Despite the rise today it has been a disappointing couple of days for the pound, the dollar has continued to benefit from the positive U.S jobs report released on Friday and coupled with the U.S. Federal Reserve again trimming their stimulus package the dollar finally looks like it has turned the corner.
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Today's level of $1.6815 is the lowest we have seen the currency pair since the 12th June and with UK house prices starting to fall it seems the pound may be running out of steam. The drop in house prices has again given the Bank of England some breathing space in terms of raising interest rates, though there is sure to be some speculation when the central bank meet on Thursday.
I am sure there will be calls for the Bank of England to raise rates as soon as possible but with wages not rising as quickly as Mark Carney had hoped and the new mortgage lending rules seemingly working I don't think we will see a rate rise until early next year.
This could mean the pound starts to suffer, especially if investors start to look elsewhere and if the U.S. economy continues to grow there is every chance the dollar will start making some inroads into the pounds gains.
A few weeks ago I talked about one of the forecasts I received from one of my brokers which indicated that GBP/USD could be down towards $1.63 in a few months time. If the Bank of England decide not to raise rates in the short term and the U.S. economy continues to go from strength to strength then it may not be long before the forecast becomes a reality.
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