Foreign Currency Market Update – GBP / USD Update
Sterling sunk to an eight-month low against the US Dollar last week as negative Sterling sentiment and weak Bank of England rate hike expectations weighed on the Pound.
GBP/USD started last week’s session below longstanding technical support at 1.5000 and Sterling sunk below resistance at 1.4910 on Monday as markets reacted to a disappointing verdict from the Confederation of British Industry. The CBI noted that government intervention in the labour market could hurt business investment and subsequently weigh on productivity. The CBI released a report showing that only 30% of employers are looking to hire more workers next year down from 40% at the end of 2013 and 2014.
And the Pound to US Dollar exchange rate tumbled to an eight-month low of 1.4805 on Tuesday as investors piled into the ‘Greenback’ following a slightly better-than-anticipated US third quarter GDP revised score of 2.0%, which beat forecasts of 1.9%. Additionally, Sterling was hurt by data showing that the government was forced to borrow £13.6 billion in November to balance the books, more than double the £6.7 billion required in October.
However, ‘Cable’ climbed higher on Wednesday as traders locked in profit from Tuesday’s eight-month high. US data showed that durable goods orders were flat in 0.0%, which bettered expectations of -0.6% but marked a slowdown from +2.9% previously.
GBP/USD fluctuated between 1.4880-1.4940 over the Christmas break before depreciating sharply at the beginning of this week’s session to a new eight-month low of 1.4790 as traders punished the Pound for its low yields and weak rate hike expectations.
There is nothing on the data front this week but it will be interesting to see whether Sterling recovers from the latest low or continues to fall further towards a new five year low of 1.4562.