Sterling falls back

24 July, 2012

Graham Harborne

Yesterday was a struggle for the pound as it was affected by the worsening situation in the eurozone. Though it fell marginally against the single bloc currency it hit weekly lows against the Dollar as a mixture of a strong USD/EUR rate and expectation of weak UK data later this week weighed on the pound.

The recovery from 3½ year lows against the pound was little in the way of relief for the euro as Spanish borrowing costs again reached new highs. This was largely on the back of 6 more regions in Spain requesting government financial aid and at the moment it is very hard to see any light at the end of a very gloomy eurozone tunnel.

Some strategists said sterling could see further weakness if preliminary second quarter UK GDP figures on Wednesday show a 0.2 percent quarter-on-quarter slide as expected, which would extend the country’s recession into a third quarter.

“We’ve seen some closing of short positions in euro/sterling ahead of the figures but we may well see cable (dollar/sterling) fall further as traders are potentially positioning for a worse than expected number,” said FxPro’s Derks.

There are mixed opinions as to where sterling will go next as it is clear that the UK is still in the doldrums and worse than expected GDP figures could see the pound fall away drastically from these recent highs so any requirements you may have in the near future are well worth discussing with your account manager here at Currency Index.