QE bets were given another boost this morning as the headline UK inflation figure fell from 3.5% to 3.0% in April which gives the BoE a little more room to work with in their quest to support the recessionary UK economy.
Foreign Currency Market Update – GBP / USD Update
Sterling took a pummelling from the US Dollar last week with GBP/USD opening this week’s trading at 1.5812, 2 cents lower than the previous week’s opening level of 1.6074. A worldwide decline in risk appetite sent investors fleeing to the safe haven of the US Dollar as the future of the UK’s largest trade partner – the Eurozone – took a turn for the worst.
The stability of the single currency was dealt another blow by the news that Greek leaders were unable to form a coalition government, paving the way for fresh elections in June which could lead to Greece being ejected from the 17-nation bloc, if the country reneges on its austerity obligations.
The Pound started its decline on Tuesday following a disappointing set of UK Trade Balance figures. Subsequently GBP/USD fell below significant support levels which ushered in a three-day freefall for the currency pair. Although the Unemployment level dropped by 0.2% on Wednesday morning, the Bank of England’s quarterly inflation report left Sterling investors with a sour taste as UK growth and inflation forecasts suffered from negative revisions, which increased the likelihood of further quantitative easing. The Pound’s downward trend against the Buck continued through Thursday, as concerns surrounding the Spanish banking sector were given credence when Moody’s felt it necessary to downgrade 16 of the Iberian country’s largest banks. The decision dampened risk appetite even further and as a result the US Dollar absorbed funds from a wide variety of spooked investors.
QE bets were given another boost this morning as the headline UK inflation figure fell from 3.5% to 3.0% in April which gives the BoE a little more room to work with in their quest to support the recessionary UK economy. Sterling looks set to fall back further against the Dollar as last month’s hawkish Central Bank tone has gradually been eroded away by a combination of weak ecostats and draining Eurozone exposure. The next strong support level comes at 1.5600 and it is entirely possible that GBP/USD could test these rates in the near future.
Summary of major upcoming data releases that we think may move the market.
- Sterling Euro US Dollar Foreign Currency Forecast – Sterling is still trading close to 4.5 month lows against the Euro
- Pound Sterling, the Euro and US Dollar exchange rate forecast – The Pound actually rallied against the Euro for the first time in six trading days
- The Pound to Euro exchange rate commenced last week’s trading at a 5-week high of 1.2071
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Kiwi surges 8% in four weeks
- Pound Sterling, the Euro and US Dollar exchange rate news – The Pound remained in a tight trading range against both the Euro and the U.S Dollar