A poor end to the week for sterling | Smart Daily Currency Note
This week (Last week)
GBP/USD – 1.4998 (GBP/USD – 1.5168)
This week has been a tumultuous one for sterling as it began the week in the ascendancy on Monday and Tuesday as traders felt sterling had been oversold. Despite disappointing Construction Purchasing Managers’ Index (PMI) data being released on Monday, Tuesdays Services data detailed a significant increase in business activity in the service sector for the second consecutive month suggesting the economy may avoid a triple-dip recession. Tuesday afternoon, however, saw the tides turn again as speculation grew that the Monetary Policy Committee may extend its quantitative easing programs causing sterling to fall below the 1.50 level against the US dollar – a two and half year low. However, as many (but not all the major banks) had predicted, the Bank of England held its asset purchasing programme whilst keeping rates unchanged. This decision caused a knee-jerk reaction in the market pushing sterling up against its major trading partners. We can expect the same sort of volatility when the minutes from this week’s meeting are released in two weeks as traders look to see how close the vote was. The afternoon saw much of the early gains slip away, with sterling dropping well below the 1.15 level against the euro, and once again pushing toward 1.50 against the US dollar. Today will be in comparison a quieter one for sterling data with much of the focus on the jobs data out of the States; however, it’s impossible to deny that sterling remains under pressure, so get in touch now for the latest news, and for an up to the second quote.
It has been a mixed week for the US dollar, starting the week stronger on the back of data showing that the services sector experienced the fastest growth in a year last month boosted notably by demand for exports which also helped push the Dow Jones to record highs. Strong labour data in the form of weekly unemployment claims and the ADP employment rates in midweek, helped support the US dollar – pushing it to a two and half year high against sterling and points towards a positive reading for today’s highly influential non-farm payrolls figures. These gains were then countered by the monthly trade balance. Released on Thursday, the results were poorer than expected coming with a deficit of $44.4 billion. This brought the US dollar back down to the 1.31 level against the euro. As aforementioned, todays non-farm employment data will be the main release on the economic calendar, alongside the overall rate of unemployment – especially with the Federal Bank’s monetary policy so closely intertwined with an improving labour market. Positive releases should enhance the dollar’s position, possibly raising it to new highs for the year.