Change of fortune for GBP as USD takes centre stage

1 August, 2014

Matthew Boyle

In what was a relatively quiet start to the week the last couple of days have seen some movement in the market and has perhaps raised questions as to whether fortunes may have changed for GBP. Yesterday saw a change in recent trends as we saw both the USD and EUR fight back against the pound – perhaps welcomed by many given the recent 6 and 2.5 year lows respectively for both against GBP.

Yesterday morning saw Euro unemployment data released – a mixed bag for countries individually but on the whole showing a reduction down to 11.5% from a predicted 11.6%. Albeit a small reduction, this combined with some slightly poor house price data (not of major note) was enough to tip the scales slightly and as such in the morning we saw GBP>EUR rates drop by a near 0.5 of a cent. This did however correct slightly through the day’s trading, partly due to the mornings CPI data which showed a reduction down to 0.4% from a predicted 0.5%. So in what was a fairly mixed bag of data by close of play rates had settled on around a 20pip loss for GBP>EUR.

The real winner of the day was USD which continued its onslaught of the previous day’s trading where its strong GDP figures and the hold on interest rates combined with its Asset purchase scheme cut saw it steal considerable ground, not only against GBP but also noticeably against EUR but also the board. Whilst US jobless data came in slightly worse than expected, this report was not a heavy hitting one and as such was not enough to slow the momentum USD gained the previous day. As a result throughout the day’s trading USD gained around 30pips against GBP.

Those who are reading this – take note. Mentioned in a few CI reports recently the pound has been the strongest of all currencies, growing near 10% in the last 12 months. We have also been slightly spoilt in the UK with what has seemed like a non-stop raft of positive data from the UK for GDP. Earlier this week the IMF released a statement warning that GBP may be overvalued by as much as 10% ………. well that is the growth we have seen in the last 10 months. With the Eurozone continuing to show signs of ongoing recovery and now with USD seemingly having turned the corner, have we seen a change of fortune for the pound?

Today the focus will be on USD as we see it take centre stage with three releases of major note – non-farm payrolls, main unemployment data and manufacturing data shown amidst a raft of less major USD releases throughout the day. It certainly will be a telling day for the USD and as such the majors – EUR and GBP as we will see whether it can keep momentum and continue to gain, or should it falter and will we see the pound and the single currency steal back the lost ground over the past few days.Certainly any of you either buying or selling USD should stay in close contact with you CI broker – we can help you stay well informed and well ahead of the markets.