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Posted January 27th, 2011 by Charles Purdy

USD/GBP Rate & Comments for 27th January 2011

US$/GBP – 1.5882

Sterling staged a muted recovery yesterday following Tuesday’s shock GDP figures, finishing the day up 0.55% against the euro and 0.3% against the US dollar. Sterling saw the recovery after the Bank of England minutes showed that another member of the committee had unexpectedly joined Andrew Sentance in calling for a 0.25% rate hike, which left some feeling that there is a likelihood of an interest rate hike later this year. MPC member Martin Weale has so far stayed on the fence, but the stubbornly high inflation caused him to side with rate hawk Sentance. In reality the likelihood of an interest rate hike in the next 6-12 months is minimal with many analysts still reeling from Tuesday’s shocking announcement. In a speech on Tuesday night, Mervyn King stood by his assessment that inflation will peak at around 5% before tailing off next year. Until the fundamental figures pick up, sterling is going to be in a holding pattern for the considerable future. Check out Smart Currency’s Nick Ryder in yesterday’s Guardian here.

In the USA, poor US data helped see the euro strengthen by 1% against the US dollar. Figures showed 445,000 new claimants for unemployment insurance against an expectation of 400,000. In addition, food and energy costs saw producer prices rise and indicated fresh headwinds for an economy that had started to show signs of a fresh recovery. However, a rise in exports helped reduce the US trade deficit in November. Out today we have consumer price inflation and retail sales figures, so speak to a trader for a price.

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