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Posted March 15th, 2013 by Charles Purdy

Is this a short term bounce for sterling? | Smart Daily Currency Note

GBP/USD – 1.5131

I can’t remember when last I was able to write that sterling is at a higher level against both the euro and the US dollar than this time last week. However this was on the back of good US economic news rather than good UK economic news as sterling gained a cent from recent lows, breaking through the 1.51 level against the US dollar and the 1.16 level against the euro. Reports suggesting Qatari officials have held talks about investing in infrastructure projects in the UK also helped. The bad news is that lots of economists are also suggesting that this gain was actually based on investors taking their profits on bets against the pound, and not on any underlying economic strength. As a consequence, the recovery looks fragile; limited support for government policy, the recent credit rating downgrade and speculation that the Bank of England will extend monetary easing all add up to create a poisonous cocktail for sterling. Indeed, HSBC yesterday downgraded their 2014 forecasts for the US dollar rate to 1.46 and the euro to 1.0420. Uncertain times indeed. Get in touch now for the latest news on this recent rally, and for up to the second rates.

The US dollar began the week fairly quietly, that is until very strong retail data was released on Wednesday, giving further backing to a continued US economic recovery, helping boost the US dollar across the board by as much as a cent against the euro and reaching a two and a half hear highs against sterling, The good news has continued through the week with strong employment data released yesterday showing the number of new people claiming unemployment related benefits had risen by less than expected. We also seemed to see a return to US dollar weakness on good economic news and therefore increased risk aversion. It is another busy day for data in the US today with releases including consumer sentiment figures, core inflation data and industrial production statistics. The US dollar has been extremely strong recently; but, was softer yesterday, call in now to see how this trend could continue.

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