by Jon Beddell
Foreign Currency Market Update – GBP / USD Update
Falling stock markets and rising risk aversion have helped “safe haven” currencies like the US dollar and Japanese Yen over the last week. A natural consequence of the US dollar strength is weakness in smaller economies currencies that are perceived by investors as more risky. That usually impacts the high yielding currencies the worst, allowing Sterling and the Euro to actually show some gains against the Aussie dollar, Kiwi dollar and South African Rand. However, during last week’s stock market weakness Sterling failed to make any headway, and it actually fell sharply yesterday after data confirmed that consumer price inflation moderated to 3.1% in July from 3.2% in June. That makes it less likely that Bank of England policy makers will raise interest rates any time soon, damaging Sterling’s investment appeal. The exchange rate fell by a couple of cents to 1.72. Sterling has recovered a cent today after the minutes from the latest BoE meeting showed that one of the nine strong committee did in fact vote for a rate hike. Andrew Sentance has been a lone voice for a few months now, calling for a rate rise while the 8 other members vote for interest rates to remain at record lows.
Uncertainty ahead of this Saturday’s Australian election has helped keep the Aussie dollar range bound, but clients with Aussie dollar requirements should take a cautious approach and either hedge their exposure ahead of the weekend, or place a stop order below the market to protect against a post election rally in the dollar. When uncertainty is removed, currencies typically strengthen.
We are still trading in a five cent range between 1.7050 and 1.7550. If we break out of that range we should see some proper movement.
Related posts:
- Australian Dollar Update – Risk aversion has swept the markets over the last week
- Daily Foreign Exchange Rate Forecast – The Dollar gains against the majors, as risk aversion stalks the market
- Australian Dollar Exchange Rate Forecast – Sterling plunges
- Australian Dollar Foreign Exchange Forecast – Sterling/Aussie dollar in a holding pattern…
- Daily Foreign Exchange Currency Forecast – Risk aversion and technical influences continue to drive the market sentiment
