Sterling Dip Holds Fire as currency markets start the day

Monday saw the Pound consolidate at the lower levels we reached on Friday following a rally to the downside towards the end of last week. A raft of poor data releases gave investors the green light to dump sterling in favour of the single currency and to some extent the US Dollar, which both made significant gains against the pound. With the government shutdown still rolling on in the US the gains were quite surprising, meaning once the issues are resolved, we could see further significant gains by the greenback, so buyers beware! Monday was a slow day, with no data releases from the UK, hence we saw Sterling trade in a fairly tight range, as mentioned, giving some respite for the lagging pound. Today is a different story though, with UK inflation figures due out at 9.30am. We are expecting a drop in the retail price index, which is generally seen as dovish or negative for the pound, meaning we are unlikely to get much positive movement if the reading is as forecast. We also have the German ZEW confidence index reading which is a key release on economic sentiment. A higher than expected reading would compound losses on the GBP/EUR pairing, so if you have to send money to the Eurozone today, it would be worth speaking to us at Currency Index before the reading at 10am. Overnight, the Reserve Bank of Australia released the minutes from its recent interest rate meeting, which showed a unanimous agreement to hold interest rates at current levels. The announcement gave little movement, although some brief initial weakness from the dollar, which was overturned as Asian trading went on. Over in the US, the Senate delayed a meeting to try and thrash out a resolution until tonight so with markets pricing in a positive outcome, the reasoning behind the unlikely gains made against sterling mentioned above, we could continue to see the dollar make gains today. Unemployment figures from the UK tomorrow and retail sales on Thursday to look forward to, the Pound could be in for a rocky ride. Don’t forget, we were trading 3 cents lower against the single currency less than two months ago so there is plenty of room for replacement against the uptrend we have enjoyed recently. So avoid getting caught out, speak to one of the brokers here at Currency Index today to discuss your requirements and gain an understanding of the tools available to you to maximize your return.