Over the past five days the Pound gradually edged lower and lower against the US Dollar as the Federal Reserve’s hawkish behaviour boosted the ‘Greenback’.
The Pound meanwhile came under pressure yesterday as top ratings agency Fitch said that it was unlikely to restore the UK’s AAA credit rating in the near future.
As the European session progressed Sterling was preparing to record its largest 5-day decline against its North American counterpart for roughly four months.
The GBP to USD exchange rate began the day on the back foot as investors dwelt on the Federal Open Market Committee’s policy decision and yesterday’s upbeat economic reports for the US.
Pound declines were consolidated as the UK’s government spending report showed that the UK’s budget deficit widened to 9.3 billion Pounds in February from 9.2 billion Pounds in the same period of the previous year.
A deficit of 8.6 billion Pounds was expected.
The figures make the UK’s new deficit goal seem a little out of reach.
The Office for National Statistics figures showed that for the first 11 months of the fiscal year, borrowing came in at 99.3 billion Pounds – which was down 4.3 per cent than in the same period of the 2012/2013 tax year.
In the view of chief economist Jonathan Loynes; ‘February’s public finance figures confirm that the UK’s budget deficit is continuing to make slow downward progress. But the big picture is still that there is a very long way to go before the public finances are restored to full health.’
As well as softening significantly against a bullish US Dollar the Pound was also weaker against the Euro, Australian Dollar and New Zealand Dollar.
In reference to the GBP to USD pairing’s performance Bloomberg News quoted one industry expert as saying; ‘The US Dollar looks like it’s gaining the upper hand. The Fed is on a slightly more hawkish stance than the market is used to. It’s been an interesting play to the downside for Pound-Dollar after looking like it was trying to make a new high. We’re in a long waiting period in the UK as Carney is on the more dovish side over the degree of slack in the economy’.
With UK inflation, retail sales and growth data due out last week further Sterling volatility is likely.
Encouraging domestic reports could help the Pound claw back losses against its US peer.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6493 ,
Pound Sterling,,Euro,1.1949,
Pound Sterling,,Australian Dollar,1.8172,
Pound Sterling,,New Zealand Dollar,1.9316 ,
US Dollar,,Pound Sterling,0.6063,
Euro,,Pound Sterling,0.8369,
Australian Dollar,,Pound Sterling,0.5497,
New Zealand Dollar,,Pound Sterling,0.5181,
[/table]
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