Sterling falls to it's lowest levels in 6 weeks

Yesterday saw the pound fall to its lowest levels against the greenback in 6 weeks as continued optimism over the U.S. economy helped boost the dollar.

The GBP/USD cross dropped to $1.56 during the afternoon before recovering back to $1.5627 at the time of writing. These rates are the lowest we have seen since the end of January and are due to a stronger dollar rather than a weaker pound.

Friday’s positive jobs data in the U.S. has reduced the chance of the Federal Reserve pumping more money into the economy to stimulate growth and with a lack of data from the UK meant the pounds performance was driven by events elsewhere.

At the start of the day the GBP/USD rate was sitting close to the $1.57 mark but throughout the day levels dropped by 0.5% to the six week low. Although half a percent does not seem like a huge amount, to put it into perspective a £200,000 trade would have seen you receive $2,000 less in the afternoon than you would have got first thing in the morning.

This is another example of how important timing can be when it comes to exchanging currency. Click here to send me a non obligation email or complete the contact form on the homepage of the blog so we can look at your requirements in further detail.

Six consecutive months of Jobs Growth in the US economy

Sterling edged up after hitting a 2 week low against the dollar last week, but remained vulnerable along with other riskier currencies due to uncertainty over Greece's progress in completing a debt restructuring deal. With a surprise fall in UK house prices and a sluggish retail sales report adding to a global drop in demand for perceived riskier currencies on Tuesday Sterling retreated back towards the 2 week low.

An absence of UK data mid-week kept GBP/USD rates open to swings in risk sentiment but fortunately rates remained relatively flat. Analysts suggested that cable’s 1.60 level looked like the peak of the recent recovery and risk is now building for a deeper break to the downside, Positive data surprises from the UK have provided some support of late but the domestic economic picture could start to run out of steam and sterling may be back under pressure.

To end the week the Dollar climbed against Sterling to levels last seen in early to mid February after key U.S. jobs data (Non-Farm Payrolls) beat expectations with 6 consecutive months of jobs growth, providing a further sign that the recovery of the world's biggest economy is becoming more sustainable. This also suggested there would be less need for further monetary stimulus from the Federal Reserve which raised hopes that an improving U.S. economy will boost the global economic outlook.

So far the key driver in the GBP/USD rates of late has been risk sentiment. Worries over Europe and its ability to deal with its massive debt problems have never really left the headlines but another factor to consider is the developments in the Middle East in particular the standoff with Iran. Oil prices have risen over 7 per cent in a very short space of time due to the tensions in the region, although historically USD/Oil have an inverse relationship (higher Oil price- weaker USD, and vice-versa) the solid economic results from the US and Europe’s debt issues have driven risk aversion with larger flows into the dollar keeping it supported against its counterparts including Sterling.

There are several volatile factors, economic and otherwise influencing GBP/USD rates, if you have an impending currency requirement the best tool at your disposal to navigate the uncertainty is to contact me using the contact form on the homepage of the blog or click here to send me a direct email.

The latest GBP/USD exchange rate news

Thursday saw the GBP/USD cross open in the low $1.57’s as the markets anticipated news from Greece regarding the debt swap deal. As the day progressed we saw a 0.7% increase in dollar exchange rates as investors became increasingly hopeful a deal will be struck.

If a deal is completed it will mean the bailout package that was provisionally agreed in February will save Greece from defaulting and go along way to helping the Eurozone. This will see investors return to the single currency and we could see GBP/USD rates push back towards the $1.60 barrier.

News from the Bank of England (BoE) that interest rates will remain at 0.5% and MPC members not making any changes to their quantitative easing programme did little to impact (as forecast) sterling’s performance.

"Sterling's movements in the near term will be more the result of euro/dollar ... The euro has been rallying as there is a more optimistic feeling about Greece and Draghi was more neutral with no suggestion of an imminent rate cut," said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank.

If you need to buy or sell dollars in the coming weeks click here to send me direct email or use the contact form on the homepage of the blog. By using a Stop Loss or Limit Order you will be able to protect yourself from adverse movements as well as target a rate of exchange that might not be available.

Tuesdays Pound Dollar Rate Forecst

Tuesday morning saw sterling lose further ground against the greenback as investors look to head back to the safety of the US dollar. As we head closer to Thursday there are still growing concerns that a deal with Greece’s private creditors will not be agreed and they will end up defaulting on their mounting debt levels. This prompted the GBP/USD cross to fall back into the mid $1.57s, a 1.4% drop on the highs we saw on Friday afternoon.

UK data released on Tuesday has shown that British House prices have dropped 0.2% more than predicted and Monday afternoon’s news that US service sector had grown at its fastest rate since February 2011, would have given added incentive for investors to head back towards the safe haven currency.

If problems in the Eurozone continue we could see the rate fall further despite the recent upturn in UK data. Forecasts have suggested we could see the pound/dollar rates fall back towards $1.55 within the next three months. However if a deal is not struck between Greece and its private creditors on Thursday, it might be a case of sooner rather than later that we see the rates reduce further.

With all the uncertainty surrounding the currency markets it is all about timing to ensure you are getting the most from your currency exchange. Click here to send me a direct email or use the contact form on the homepage of blog to discuss the different options available to you.

Sterling loses ground against the dollar

Monday saw the pound fall to a two week low against the dollar, as uncertainty surrounding the Greek bailout package continued. There was also a down turn for the pound as UK services sector data came back lower than expected.

This Thursday is the deadline for Greece to complete its bond exchange with private creditors and if a deal cannot be reached there is a chance it could affect the recently agreed bailout package. This could push Greece towards a catastrophic default and cause investors to head back towards the safe haven dollar.

The UK's service sector continued to grow in February, but not as quickly as had been forecast. Despite seeing a small drop, the latest data release confirmed the service sector is still moving in the right direction adding to signs that a double-dip recession will be avoided. This reduced the pound falling further but according to some analysts the outlook for the pound will be determined by the outlook of the Euro.

With all the uncertainty, the GBP/USD cross dropped into the $1.57 range early yesterday, it’s weakest since the 24th Feb before slowly recovering to the mid $1.58’s by the afternoon.

It shows how quickly the rates can move as only last week we saw the dollar rates hit their highest since November 2011. If you want to take advantage of the highs and protect yourself from adverse movement you can look at a Forward contract. A forward contract allows you to book rates of exchange for up to two years in advance and will give you the piece of mind that your money is safe. If you want to discuss forward contracts or the other options that are available click here to send me a direct email or complete the contact form on the home page of the blog.

Pound Dollar Rate Forecast weekly overview

At the start of the week a lack of data releases from the US prompted a more stable feeling to the market compared to recent weeks with rates sitting around the $1.58 Interbank mark.

We did see a small recovery for the dollar on Tuesday on the back of an announcement that Greece had their credit rating downgraded, and the CBI data release in the UK which showed Britain’s service sector had weakened. This prompted a flight to safety as investors left the UK and single currency.

Tuesdays CBI data release has shown Britain’s service sector has weakened, this covered the three months ending the 31st January. In the report consumer and business services saw a drop in activity, but in both cases it was not as much as first feared.

Towards the end of the week we saw rates hit their highest since November 2011. This was mainly down to GBP strength rather than dollar weakness, with Sterling shaking off slightly weaker-than-expected UK manufacturing data, and reduced bets on further quantitative easing.

In recent weeks we have seen better data coming out of the UK, and as a result it has shifted expectations that the Bank of England will pump more money into the economy to stimulate growth. BoE governor Mervyn King has said the bank will be guided by upcoming data when deciding whether to print more money.

With Fridays mornings Purchasing Managers' Index (PMI) for construction showing a rise to 54.3, up from 51.4 in January, it was more good news for the pound. Strength in the construction industry could help the UK avoid a double-dip recession, after the economy shrank during the last three months of 2011.

With the sudden move in rates it is another indication of just how volatile the markets can be. Last week the interbank was down in the $1.56 region, which means we have seen rates move by nearly 2% in the last seven days.

With forecasts still showing a mixed feeling about the GBP/USD cross it’s important to make sure you have the necessary precautions in place. Depending on where you look you could see predictions for pound/dollar exchange rates ranging from 1.55 to 1.59 for the next 3 months.  A £200,000 trade could mean a difference of 8,000 dollars. Click here to send me a no obligation email or complete the contact form on the home page of the blog. 

How will the ECB stimulus help the GBP/USD cross?

What a difference a day can make. In my last post I said that things have been quieter for the dollar exchange rate over the last couple of days.

Rates had been sitting around the $1.58 mark at the start of the week, but with the European Central Bank (ECB) announcement on Wednesday that they have provided a further 530bn euros in low interest loan we saw a steady rise for GBP/USD cross.  At the time of writing the mid-market rate has risen to $1.5950, this is the highest we have seen rates since November 2011.

This is the second time the ECB have offered low interest loans in the last few months. In December banks from around Europe borrowed 489bn euros and there was no shortage of takers this time round, with a number of British banks confirming that they have taken up the option of cheap borrowing.This helped strengthen the pound on the basis it will help the British banks improve their liquidity.

The loans are also aimed to help the eurozone battle the ongoing debt crisis. As confidence grows investors will leave the safety of the US dollar and return to the UK and the Euro which in turn will weaken the dollar and make it cheaper to buy.

This is another indication of just how volatile the markets can be. Last week the interbank was down in the $1.56 region, which means we have seen rates move by nearly 2% in the last seven days.  This was good news for clients that had Limit Orders in place.

With a Limit Order you specify the exchange rate you are hoping to achieve, a price that may not be currently available. Your currency will automatically be purchased if the market exceeds this level and you'll get the rate you wanted.

If you need to buy or sell dollars in the coming weeks or would like to discuss a Limit order, you can use the contact form on the blog home page or click here to send me a direct email.