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GBP USD Hits 5 Year Lows

GBP USD Hits 5 Year Lows

Good morning and it appears we have found ourselves at Monday again.

 

Sterling is really struggling against the US Dollar at the moment and by the close of play on Friday, it had hit 5 year lows. The reasons for this are varied. The uncertainty of the May 7th General Election still looms large and the likelihood of a hung Parliament is still the most likely scenario. As I have often pointed out, the markets see uncertainty as weakness and an inability to know what the future holds is often the easiest way of devaluing a currency. It is unlikely that we will see any great GBP recovery until we know who is actually governing the country for the next few years.

 

What news has come out of the UK has not been overly favourable, and now most traders are looking towards tomorrows CPI data release. This fell to zero in February and there is now a risk that it could fall into negative territory. This is not good news for the GBP. It also seems, albeit rather harshly, that the Pound is being punished for the Bank of England’s current interest rate inactivity. As expected, the BoE kept interest rates unchanged on Thursday, but what did the markets really think was going to happen? When compared to the activity of the Fed, this is not looking favourable.

 

The US Dollar is also being boosted by it being the world’s second best performing currency this year, after the Swiss Franc. Jobless claims have dropped to an almost 15-year low and a rate hike is very much on the agenda.

 

Today is a relatively quiet day with some minor data releases out of France, Italy and Portugal and bill auctions out of the US.

 

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