Sterling is trading relatively unchanged against the Dollar over the last week


By Jon Beddell

Foreign Currency Market Update – GBP / USD Update

Pound Sterling to US Dollar Foreign Currency Exchange Rate Forecast - Sterling is trading relatively unchanged against the Dollar over the last week

Sterling is trading relatively unchanged against the Dollar over the last week, tending toward the lower end of the 1.54 – 1.61 range that has been in place for the last quarter. There’s a lot of talk of volatility and uncertainty in the markets lately, but although the latter is undeniably present in high volumes, the former seems to be somewhat of a red herring. In fact the Sterling / US dollar exchange rate has been trading in an unusually tight range for the last year or more. The difference between 52 week high and low is only 10%, the tightest annual range since Sterling traded above 2 for 1 in 2007. This lack of volatility can be attributed to two factors. Firstly a notable absence of direction for interest rates, with both the Federal Reserve and Bank of England sitting firmly on the fence through 2011. You have to go back to December 2008 for the last change by the Fed’, and March 2009 for the BoE. Secondly, the outlook for the global economy remains sluggish, especially for the Western world. As ecostats tick higher the Dollar sags a cent or two, only to regain the lost ground on the first signs of weakness. This behaviour supports the conclusion that unless and until we see a true breakout in economic terms (either for better or worse) we are unlikely to see any definitive trend in the Sterling / Dollar exchange rate. All we do know is that the Dollar’s fortunes (being a ‘safe haven’ currency) will be inversely linked to economic news flow.

In the short term we are nearing the 18 month lows around 1.53. If Euro zone talks fail and trigger a succession of defaults we can safely say the world economy is heading the wrong way and Dollar strength will pervade. A break below 1.53 would be a good indication of market expectations backing that scenario, so Dollar buyers should be on alert to cover any requirement should this happen.

Related posts:

  1. After falling through key support of $1.6400 towards the end of trading last week, Sterling has deteriorated even further this morning.
  2. US Dollar Update – Higher than expected inflation data helped sterling earlier in the week
  3. Daily Foreign Exchange Rate Forecast – Pound trading close to an eight week high
  4. Sterling trading weaker after lower than expected inflation figures…
  5. Sterling continued to decline against the Euro and USD during trading yesterday.

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