Currency Market Updates | Sterling Winds Lower

Sterling Winds Lower

Sterling Winds Lower

27, August 2009

Are we going to see another prolonged period of sterling weakness? The signs are not looking too good for the beleaguered pound and the defining moment will be tomorrows UK GDP data which is expected to emphasize a further contraction in growth.

Negatives are also growing due to doubts that QE measures introduced have not had the required effect in the UK economy and with the door open for further expansion of the QE programme this does not bode well. With the prospect of rising unemployment, contracting growth and further stimulus being probed in an economy with hugely spiraling public debt then you can see why the market is bearish on the pound.

However the market changes sentiment like a weather cock and a better than expected GDP number could kick start the pound back into life tomorrow.

Currently we are poised at 1.1363/0.88 against the euro which is a major support level. A break of this barrier will not be good news and will open the door for a move towards 1.11. Against the USD we are nestled at 1.62 which is the lower side of the current range. Here it is ominous for a move back to 1.60 and beyond. Data this morning may have helped stop the rot but it certainly has not turned the trend.

UK Nationwide house prices rose 1.6% which was better than expected.

Yesterday in the US we saw further positive economic data as Durable goods orders and New Home Sales both came in above expectations. This actually helped the USD to strengthen across the markets except against the Japanese Yen.

Later today we have US GDP and jobless claims. The US GDP could cause volatility on USD pairings.

Report by Phil McHugh.

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Currency Market Updates are compiled by Tom Nadir.

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