Buying opportunities for sterling exchange rates

7 September, 2016

Rob Bastin

Yesterday’s trading began very flat with an absence of any UK data. Euro-zone GDP came in exactly as expected at 1.6% growth on the year, and so exchange rates remained very stable heading into the afternoon session. The US session included one main announcement for their ISM Non-Manufacturing PMI figure for August, expected to see a growth figure of 55. Dollar markets were however disappointed with the actual figure of just 51.4 which saw the greenback weaken across the board during the afternoon trading.

For US Dollar buyers this has given a surprise opportunity to buy from Sterling at the best levels for nearly 2 months, and arguably a peak opportunity given the strong ceiling of resistance at 1.35, and unified forecasts for a return to sub 1.30 levels in the coming months. The same can also be said for Euro buyers, with GBP/EUR testing the 1.20 resistance yesterday before sharply correcting back down again. Current buying levels are largely viewed as being over inflated and unsustainable given the ongoing negative backdrop for Sterling. Markets still expect another rate cut from the Bank of England when they meet at the beginning of November and the downward trend for the pound is still very much intact despite the extent of recent improvements. When assessing the odds the current rates are extremely attractive for anyone needing to buy Euros or Dollars, and Forward Contracts are also proving very popular at these levels.

This morning we have July figures for Industrial and Manufacturing Production in the UK, data that could give a limited spike if positive, but could also be the catalysts for the sellers to start taking over again should the figures disappoint. NIESR GDP estimate for August is also due at 3pm, at the same time as an interest decision from the Bank of Canada.