Pound Sterling advanced to a four-and-a-half year high against the US Dollar on Monday as the currency received support from news that a US company has made a bid for the UK pharmaceuticals company AstraZeneca.
Sterling advanced after news broke that the US pharmaceuticals giant Pfizer had confirmed that it had put in a bid to buy its UK rival. The deal could be worth up to £60 billion, increasing expectations for a rise in foreign firms buying Pounds which strengthened the UK currency.
“The Pound seems supported on market expectations of supportive corporate flow. Improving data out of the UK this week could further boost sterling sentiment,” said the head of European G-10 strategy at Citigroup Inc.
Also supporting the currency is increased optimism that the Bank of England will raise interest rates early next year. Optimism is high due to a string of positive UK data releases which included a fall in unemployment to below the Banks target of 7%. Investors forecast that tomorrow’s GDP data will come in strongly.
Economists are expecting GDP in the first quarter to rise to 0.9% from the 0.7% recorded in the final quarter of 2013.
“A better-than-expected release could see the Pound break through the resistance at current levels and move towards the $1.7000 mark against the US Dollar,” said Nawaz Ali, a market analyst at Western Union Business Solutions.
A strengthening Pound has raised some concerns that it could start to have negative implications upon the UK’s export sector.
The US Dollar meanwhile is under pressure against a number of peers as investors take a wait and see approach to this week’s wealth of data releases. Later in the week the Federal Reserve will reveal its latest interest rate decision and quantitative easing policy decision. The end of the week sees the release of unemployment data which is forecast to show that the labour market in the world’s largest economy improved in April.
The GBP to USD exchange rate is currently 1.6845 but the ‘Greenback’ is likely to weaken further this afternoon if today’s pending home sales data comes in below expectations.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.5937,
US Dollar,,Euro,0.7210 ,
US Dollar,,Canadian Dollar,1.1020 ,
US Dollar,,Australian Dollar,1.0776,
Pound Sterling,,US Dollar,1.6845 ,
Euro,,US Dollar,1.3869 ,
[/table]
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