Bets that the Pound’s recent rally was overdone saw the Pound slide to a six-week low against its US counterpart (GBP to USD) on Wednesday.
The British currency declined against the ‘Greenback’ for a second day, shedding 0.62 per cent and hitting a low of 1.6694.
Over the last few weeks the expectation that recent upbeat UK data releases would push the Bank of England into raising interest rates have seen the Pound surge to multi-month and multi-year highs against several of its major rivals.
However, some industry experts believe that Sterling’s gains have been excessive and that a cooling in the overheated housing market will prevent the central bank from issuing a rate hike before the spring of next year.
As highlighted by currency strategist Neil Mellor; ‘Although Sterling has its attractions, you get the sense that enthusiasm has waned. Whether there’s enough out there to take on the 1.70 Dollar level, I have my doubts at the moment because the question of interest rates is just a little more uncertain that it was. The market’s looking to lock in profit at the moment and it may need another catalyst.’
On Tuesday a report compiled by the British Bankers’ Association showed an unexpected decline in UK mortgage approvals.
Today the Confederation of British Industry announced a slowing in retail sales. The CBI reported sales index remained in growth territory but slumped from +30 to +16.
The report detailed a slower annual rise in retail sales among grocers this month. It also showed that internet sales climbed at their slowest pace since mid 2013.
The Pound also weakened against the Euro on Wednesday in spite of an unforeseen increase in German unemployment.
The level of joblessness in Germany held at a seasonally adjusted 6.7 per cent but the nation shed 24,000 positions.
Upbeat consumer confidence data for the Eurozone limited any Euro losses and the GBP/EUR exchange rate looks set to close the local session 0.30 per cent softer.
Today’s US MBA mortgage applications data (which showed a 1.2 per cent decline in the week ending May 23) had little impact on the Pound to US Dollar exchange rate.
Thursday’s UK Lloyds business barometer is unlikely to have a significant impact on the Pound tomorrow, but movement in the GBP to USD pairing can be expected to follow the release of US growth and personal consumption data.
If the US economy is shown to have contracted by 0.5 per cent in the first quarter of the year, year-on-year, as forecast Sterling could rebound.
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,0.5987,
US Dollar,,Canadian Dollar,1.0861,
US Dollar,,Euro,0.7356,
US Dollar,,Australian Dollar,1.0851,
US Dollar,,New Zealand Dollar,1.1783,
Canadian Dollar,,US Dollar ,0.9212,
Pound Sterling,,US Dollar,1.6704,
Euro,,US Dollar,1.3598,
Australian Dollar,,US Dollar,0.9226,
New Zealand Dollar,,US Dollar,0.8478,
[/table]
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