Stormy Times Ahead

30 October, 2012

Graham Harborne

After last week’s pound rally, following a string of impressive data releases, yesterday saw sterling give up ground against both the dollar and euro. Early morning lending data came in better than expected and despite showing initial strength the pound was unable to sustain its recent gains.

Further concerns over Greece and Spain weighed on the riskier currencies (of which GBP is seen as one) and the pound fell 0.5% against the dollar and 0.25% against the euro. Markets were also in a less than buoyant mood as the ‘Frankenstorm’ made its way towards the east coast of America. With financial markets closed in the States both yesterday and today we could well see a similar story today and when they re-open tomorrow it will be interesting to see the affect Hurricane Sandy has had on the financial markets and most importantly how traders react to it.

There is limited UK data this week but a raft of data from Europe and the US which will be the main driver for the FX markets. To add more confusion to the markets is the possibility that due to strong recent UK data the BoE may not feel the need to extend their QE programme. This would normally be positive for the pound but the fact that QE may have helped the economy over the past months has concerned many analysts that a lack of further action by the MPC could be a case of 1 step forward 2 steps back.

Tough times at the moment and hard to know where the market will go next. To try to make sure you are not caught out keep in touch with your account manager here at Currency Index.