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Posted July 23rd, 2013 by Charles Purdy

Will sterling benefit from the birth of a Royal baby? | Smart Daily Currency Note

GBP/USD – 1.5364

Even before the announcement of a new Royal baby and the third in line to the throne, Sterling continued its upward trajectory yesterday as hopes for a sustainable economic recovery in the UK increased ahead of Thursday’s second quarter Growth figures. The pound made gains against the majority of its major trading partners and most notably continued to strengthen against the US dollar for the fifth day in a row as it was traded at the highest rate since June. Prime Minister David Cameron announced that improving economic conditions may allow the Coalition Government to implement tax cuts in the near future, lending further weight to sterling optimism. Thursday’s Growth data will be integral in determining whether we see sterling continue to appreciate. Further growth would lend support to the pound by giving credence to the notion of a sustainable economic recovery for the UK. Predictions range from around 0.3% to 0.8% growth, with most key figures expecting 0.6%. Speculation ahead of the release will continue to affect sterling performance and solid growth figures are likely to help sterling maintain its strong recent performance, but bear in mind that if the figures undermine the positivity seen in recent days then we are likely to see a sharp decline. Additionally, this morning sees the release of Mortgage Approval data from the British Bankers’ Association, which has the potential to have a more immediate impact on performance. Call in now to see whether sterling strength has continued.

The US dollar performed poorly yesterday as a combination of a persistent uncertainty regarding the possible tapering back of the bond-buying programme and worse than expected existing home sales data caused the dollar to slide against the majority of its major peers. As expected, the US dollar’s sensitivity to economic data has increased following Ben Bernanke’s expressed commitment to an accommodative monetary policy and the reaction yesterday was negative. Most notably the US dollar traded at its lowest rate this month against a resurgent sterling. Whilst there is not a great deal being released today in the way of influential data impacting on the world’s largest economy, the temperamental dollar may still see movement in response to speculation regarding future monetary policy. Tomorrow sees the release of existing home sales data, which – as with the home sales data released yesterday – has the potential to cause further dollar volatility. Call in now to keep pace with dollar volatility.

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