Home > Resource Hub > Daily Market News > Sterling drops to seven-month low versus Dollar

Sterling drops to seven-month low versus Dollar

Sterling drops to seven-month low versus Dollar

Sterling recovered from a six-month low against the dollar on Friday on expectations of stronger UK retail sales data; although traders said gains may be temporary given worries about the growth outlook. The pound has fallen heavily since the Bank of England quarterly inflation report on Wednesday forecast higher inflation and weak growth. UK retail sales are forecast to rise in January, after falling unexpectedly the previous month. A positive number would help soothe concerns about the UK economy slipping back into recession, although some strategists said a reading in line with consensus would not be enough to halt sterling’s recent downward trend.

French President François Hollande has admitted there’s little chance for France to meet its growth and budget-deficit targets this year. Also, in a move discouraged by the Berlin government, the European Central Bank and the Bundesbank — that the euro’s rise on the foreign exchanges needs to be brought under control. The issues of growth and the exchange rate are linked. Germany is projected to exceed France’s economic growth in 2013 for what will be the seventh year out of the last eight. Also, Italian voters are braced for an onslaught of tax-cut promises and attacks on the European Union as the four leading candidates take to the airwaves and criss- cross the country in the election campaign’s final days.

On the FX markets, according to the latest CFTC commitment of traders report, leading into the BoE’s inflation report, GBP shorts were building positions as longs were paring, in turn this forced the net GBP position to short (USD 1.6bln), which according to analysts at Scotia Capital is considered a sell signal. The pair is set to remain under pressure this week, especially as the upcoming release of the BoE minutes will likely underpin the growing view that the MPC are ready to employ further policy easing and overlook any immediate upward inflationary pressure. In terms of technical levels, supports are seen at 1.5393/73 and then at 1.5350. On the other hand, resistance levels are seen at the 10DMA line at 1.5647, 1.5690 and then at 1.5700.

Currency UK will offer you the best exchange rates available and ensure that your subsequent international transfers are handled as quickly and as efficiently as possible.

Do you want to earn some extra money? Then you can profit from our affiliate program by referring a company or friend that may benefit from our services and earn a commission in return. Contact us now on +44 (0)20 7738 0777 or click here.

Share this case study
Set yourself up in minutes, make payments the same day: it’s free, easy and without obligation.