Pound to US Dollar Forecast 2010

Good Morning. Today we’ll have a detailed look at GBP to USD. First a quick look at rates across the board:

  • GBP/EUR 1.1296
  • GBP/USD 1.5388
  • GBP/AUD 1.6523
  • GBP/NZD 2.1621
  • GBP/CHF 1.6216
  • GBP/CAD 1.5370
  • GBP/ZAR 11.167
  • GBP/JPY 143.80
  • EUR/USD 1.3620

Pound vs US Dollar
Over the past week we have seen a relatively flat movement pattern for the Sterling-Dollar currency pairing, with only a 1.24% difference between the highs and lows of the week. Whilst most European markets were closed on Easter Monday, the U.S. exchanges were business as usual. Data released from New York that day included the Purchasing Manager’s
Index and pending home sales which were both seen to exceed expectations.

This showed that U.S. employers were creating jobs at the fastest rate in three years this past March, reinforcing the perception that the U.S economy is definitely on it’s path to recovery.
As European markets reopened again on Tuesday, Sterling seemed to remain fairly well supported until Prime Minister Gordon Brown announced a general election in the UK and the subsequent opinion polls differed wildly.

Some analysts still fear the result of a hung parliament., producing an incoming government that would lack authority to get to grips with the UK’s fiscal deficit.

Indeed, the pound suffered as opinion polls suggested that the opposition Conservative party may fail to win a majority, with a poll in The Guardian newspaper giving them a lead of just four percentage points. Adrash Sinha of Barclays Capital, stated that even if the Tories performed better than average in marginal seats (as most observers expect) they would struggle to form a strong government.

“The sensitivity of sterling to election news is likely to increase over the next month – while it has appreciated recently, we think a further significant advance from these levels is unlikely until the uncertainty around the election is resolved,” he said. The worry that it may potentially be rather difficult to tackle the UK’s deficit will weigh heavy on the performance of Sterling and may not be concluded until after the election result is known.

“Sterling will now be at the whim of the opinion polls until the election on May 6. Polls showing no clear Conservative majority will be seen as negative for the pound,” said Michael Hewson, analyst at CMC Markets.

As the dollar strengthened against all major currencies including the pound during midweek trading, the Federal Reserve said it may keep interest rates ultra low for longer than expected. Adding to the Greenback’s strength in the currency paring, was news that activity within the UK’s dominant service sector was weaker than expected.

A survey by Markit and the Chartered Institute of Purchasing and Supply showed the purchasing managers’ index on the services sector fell well below forecasts. The data highlighted weaknesses in the UK economy, which weighed on sterling, although this was reflected mainly in falls against the dollar as concerns about Greece’s parlous fiscal health sent the Euro lower against a range of currencies.

Thursday’s Monetary Policy Committee meeting at the Bank of England was largely uneventful with political uncertainty otherwise weighing the Pound down. Elsa Lignos, currency strategist at RBC in London stated that “debt issues are still hanging over and until we have a clearer picture of what the election outcome will be, it will be hard for sterling to gain, especially since polls are showing the election is still in hung parliament territory.”

With all this political uncertainty and ever changing majority forecasts in opinion polls, it is well worth taking the time for a consultation with your Account Manager here at the Foremost Currency Group. We keep abreast of economic data releases and opinion polls to allow us to deliver sound market knowledge, helping maximise your Sterling/Dollar currency potential.

Today the US will deliver data on Retail Sales and the Consumer Price Index as well as the Fed Governor Ben Bernanke, who will give a press conference as to how the Fed observes the current U.S. economy and the value of USD. The UK will also release figures for Consumer Confidence surveys this day.

So with the continuing electoral domination of the markets and the media, coupled with the aforementioned data releases; many clients at FCG are taking advantage of Stop Loss and Limit Order tools. Talking to your account executive and knowing where to place a minimum and/or maximum on your exchange rate would help to optimise your purchase.

This would safeguard against any potential loss should the market drop and ensure that you are able to take advantage of any upward spikes without having to watch the goings on within Westminster.

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