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Posted July 19th, 2013 by Charles Purdy

Another roller coaster week for sterling | Smart Daily Currency Note

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(GBP/USD – 1.5138)   GBP/USD – 1.5229

Sterling had a roller coaster week dropping to  a four month low against the euro and struggling against the dollar earlier this week as weaker than expected inflation data appeared to give the Bank of England more licence to keep monetary policy loose. This meant that all eyes were on Wednesdays release of the minutes from the first Monetary Policy Committee meeting with the new Governor Mark Carney in charge. What was revealed caught the market by surprise in that all 9 members voted in favour of maintaining the Bank of England’s quantitative easing target instead of increasing it. This caused sterling to jump over a cent against the US dollar and euro as many key figures expected the vote to show several members (including the new Governor Mark Carney) to vote in favour of increasing the quantitative easing program, rather than the unanimous decision against this that was revealed. Sterling was also boosted by the news that unemployment claims had dropped by over 20,000 in June, whilst retail sales figures released yesterday came out as expected. This morning sees the release of UK Public Sector Net Borrowing data and a high deficit can have a negative effect on sterling’s performance. Call in now to track developments.

The US dollar had a poor start to the week as retails sales figures came in much lower than anticipated. Whilst typical estimates put growth at 0.8%, the figures revealed growth to be only at 0.4%, underlining the fact that recovery has been less convincing in the second quarter for the US. Many had hoped for some clarity regarding when the Federal Bank may look to start tapering its quantitate easing program when the Chairman of the Federal Reserve addressed congress this week; however, the Chairman asserted that a tapering of bond-buying must be based on consistent economic data and that a slowing in asset-purchasing would be likely to happen if US inflation made a determined move towards the 2% target (which this week came out showing an inflationary figure of only 0.2%). Some respite came yesterday as employment data released showed a better than expected drop in US unemployment claims in the previous month. However, whilst Bernanke remains committed to an accommodative policy the US dollar may continue to oscillate until we see the cumulative positive data that the Federal Open Market Committee is looking for. After an eventful week, there is less provocative data on offer today, although given sharp movements we have seen in recent days, some further volatility is not implausible. Call in now to keep pace with market movement.

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