Sterling hits 6 week low vs USD

Tuesday 22nd November 2011
Good morning. The Pound fell yesterday to a 6 week low against the US Dollar, and also dropped against the Euro, as investors shunned riskier currencies in favour for safe haven assets such as the USD. The EU debt crisis however is keeping the Euro weak and has limited drops in GBP/EUR rates. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1577
• GBP/USD 1.5681
• GBP/AUD 1.5849
• GBP/NZD 2.0868
• GBP/CHF 1.4310
• GBP/CAD 1.6250
• GBP/ZAR 12.951
• GBP/JPY 120.65
• GBP/DKK 8.6143
• GBP/NOK 9.0538
• EUR/USD 1.3543

Pound falls to 6 week low against the US Dollar

Investors have been seeking safety due to the market turmoil caused by the Eurozone debt crisis. When there is economic uncertainty, investors tend to move away from riskier currencies such as Sterling, and instead seek the perceived safety of the US Dollar. This has strengthened the US Dollar and pushed GBP/USD rates to a 6 week low.

Sterling at risk of further drops this week

There is some key data this week that could push the Pound lower against other currencies. Tomorrow, minutes from the BoE’s latest monetary policy committee (MPC) meeting will be released. They left interest rates on hold at the record low of 0.5% and opted not to pursue further QE for the time being.

Analysts however expect the minutes to show the BoE’s readiness to extend quantitative easing further. Last week, BoE policymaker Martin Weale said there was a “very strong case” for extending the central bank’s QE programme next year. Another BoE policymaker also argued that high inflation was not a threat and the economic outlook had turned out to be grim, as forecast.

This is likely to keep Sterling under pressure, however drops vs the Euro will probably be limited due to the EU debt crisis.

Today’s Data

Public Sector borrowing figures are released for the UK today. In the Eurozone there are measures of Consumer confidence. The main data today comes from across the pond, with US Gross Domestic Product and Canadian Retail Sales. We also see the FOMC (US) minutes which can indicate future interest rate movements.

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