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Pound moves higher versus USD

Pound moves higher versus USD

The Dollar has suffered over the last couple of days as a dovish set of FOMC minutes, which downgraded prospects for both growth and inflation, has been compounded by some weaker than expected data, including a Empire manufacturing survey which disappointed. The FOMC minutes even talked about extending fiscal easing measures if the economy took a downturn, a very different sentiment from the austerity measures being implemented in Europe. It wasn’t all bad news over in the US though, as BP have finally managed to cap the oil gushing into the Gulf Coast. BP’s share price jumped up 8% on the news of the successful cap, and Goldman Sach’s share price has also risen after the SEC imposed a record fine of $550m on the firm for acting as an agent for securities upon which their client was betting against. Although the fine is a record, it represents about one week’s worth of trading for the US bank, and they will eagerly take the fine, and put it all behind them.

The bad news for the Dollar has contrasted strongly with the good news for the Euro. Spain had a successful bond auction, indicating that the market has some confidence in their ability to pay off their debt, while the Italian government won support for their own austerity measures, and Greece have moved further down the route of actually implementing their austerity measures with union deal which lowers real wages. The combined effect of dovish Fed and optimistic Eurozone have led the EUR/USD rate up 1.2950, quite a recovery from over a month ago when the rate was down near 1.19.

The Pound has risen against the Dollar, and fallen back slightly against the Euro after yesterday’s events, it has also made some headway against the Australian Dollar after the batch of Chinese economic figures disappointed the markets. When contrasted with data from the developed nations the data is remarkable, but the expectations for the Chinese economy are much higher, so when they report 2.25% growth in Q2 it is seen as a disappointment. Inflation is running along at 2.9%, while industrial production growth was 13.7% for the year, all of which points to a soft landing for the Chinese economy, but the markets expected more, and the Australian Dollar which relies heavily on China for its commodity exports has suffered , allowing the Pound to jump above 1.75.

After the Pound’s rally against the Dollar, it may be vulnerable to some position squaring before the weekend.

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