Sterling falls on better US Data

Thursday 25th August 2011

Good morning. After several days of not much happening with exchange rates, Sterling fell against the Euro and US Dollar yesterday. Investors had been betting on Sterling as a safe haven currency, but better than expected US data reversed this trend, pushing the Pound lower as we have been warning for several days. At 08:30am this morning rates are as follows:

GBP/EUR 1.1331

GBP/USD 1.6384

GBP/AUD 1.5644

GBP/NZD 1.9717

GBP/CHF 1.2993

GBP/CAD 1.6156

GBP/ZAR 11.848

GBP/JPY 126.29

GBP/DKK 8.4392

GBP/NOK 8.8727

• EUR/USD 1.4459

Sterling falls on better US Data

Market Analysts have said some investors had been betting on the Pound in the last few weeks, on the perception the UK is a safer investment option, U.S. fiscal problems and the euro zone debt crisis that shows few signs of resolution. This meant that the Pound had gained in recent weeks, and exchange rates had risen. For some time we have been warning that the gains were not likely to last, and yesterday this was the case.

A surprise rise in durable goods orders from the USA for last month strengthened the US Dollar, and as a result Sterling weakened and fell against other currencies. For several days there has been little data in the markets to move exchange rates, but as soon as we got some, the Pounds gains came to an end.

While sterling has been supported due to its perceived “safe-haven” status, few expect it will gain much more due to expectations that UK interest rates will stay low for a prolonged period as Britain’s economy struggles to recover.

The pound remains at risk of selling if economic data continues to show the recovery is stuttering as it would increase speculation that the Bank of England may opt for more quantitative easing. For the remainder of this week we have GDP figures from most major zones, which will show how each economy is growing, and we expect the numbers to have a significant effect on exchange rates.

Today’s Data

The most important release today are German GDP figures. If poor these could weaken the Euro. In the USA we see Jobless Claims and Unemployment Data.

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