Pressures lie ahead for the sterling
Another week of high volatility as GBP/USD breaks through 1.65 after tailing off toward 1.62 earlier in the week. Sterling has been buoyed by better than expected retail sales figures which have come in for a second consecutive month in positive territory. However with unemployment likely to increase over the coming months it is not clear whether these figures can be sustained in the longer term.
Sterling remains in a tentative position and speculation that the Bank of England will expand its asset purchase scheme will do nothing to aid a sustained improvement. The news that 3 members of monetary policy committee voted for an extra 25bn shook sterling on Wednesday but it is managed to regain the majority of the losses in early morning trading.
Sterling is still struggling against the commodity currencies and is flirting with multi year lows against the AUD and NZD. It is difficult to see how these levels will be sustained particularly if we see an end to the Bull Run in equity markets which has helped strengthen the so riskier currencies in the past six months.
For more information please contact John Dolan, analyst at No1 Currency on 0131 561 8416
