Concerns over UK growth could undermine sterling next week | Smart Daily Currency Note
GBP/USD – 1.5310
Sterling has had a “steady” week. It lost a bit of ground against the US dollar, held its own against the euro and gained against the commodity backed currencies. During the week there were some ups and downs as data was released but we did appear to be in a period of relative calm for sterling especially when compared to the first three months of this year. However this could all change next week with the release of first quarter GDP figures. Will the UK economy be subject to a triple dip recession? The Bank of England monetary policy meeting minutes revealed no change in the number of members voting for an increase in quantitative easing although analysts are predicting that when the new Governor takes up his post at the Bank of England in July, it will herald a fresh cycle of quantitative easing which is likely to undermine the currency further. During the week sterling did slip against the euro to a six-week low and looked susceptible to further weakness in light of continuing concerns about the British economy and following comments from the IMF who suggested it may be time for the UK to consider altering its current fiscal plans. Sterling lost ground against the US dollar as data released showed UK unemployment rates climbing while wage increases were lower than the level of inflation. Inflation data showed that headline inflation of 2.8% remained above the Bank of England’s target of 2.0%. Further negativity came yesterday as poor UK retail sales figures were released. We have a quiet day today in terms of sterling data but the IMF and G20 meetings taking place could well lead to a volatile market. Call now for the latest news and updates.
It has been a varied and eventful week for the US dollar as it responded to a mixed release of data. The currency performed poorly during the middle of the week in response to a falling US Consumer Price Index and relatively restrained inflation data coming out despite the 2.5 trillion dollars of quantitative easing that has been pumped into the US economy over the last 5 years. Whilst there was further fluctuation in both directions towards the end of the week after the Beige book indicated continued economic recovery, the US dollar ended up at back around the 1.53 mark against sterling and looked to be weakening towards 1.31 against the euro. A speech by the Governor of the Federal Reserve today could have an impact on performance throughout the day as could on-going developments in the G20 meetings. Call in now for live rates and up to date information.