| British Pound to focus on quarterly inflation report |
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| Written by Sam Coventry | |
| Monday, 08 February 2010 11:31 | |
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TorFX say they believe the British Pound will struggle against the US dollar over the course of the week. __________________ The pound dollar rate is lower while the euro pound rate is higher in morning trade. The GBPUSD is 0.160% lower with 1 GBP fetching 1.5578 USD. The EURGBP is higher 0.601% with 1 EUR = 0.8791 GBP. "Following on from last week, the Pound continued to decline against the U.S Dollar through Friday, slipping back towards the lowest level in more than eight months, after the Bank of England left interest rates on hold at 0.5% but indicated that further quantitative easing may be necessary to cement the economic recovery. The UK currency strengthened moderately against the Euro but economists fear the rally may be short-lived," says Adam Solomon at corporate FX specialists TorFX. The British Pound fell to $1.5650 against the Dollar on Friday, as a dramatic slump in equities worldwide spurred demand for the perceived safe status of the US currency. Indeed the sterling recorded is biggest weekly loss against the greenback since September, as the FTSE 100 index slid 2% in London, pushing its decline to 4.2% in just two days. The MSCI World Index also fell 1.2% on Friday and the British pound weakened against the majority of the 16-most actively traded currencies, amid speculation that the economic recovery will relapse. Paul Robson, a strategist at Royal Bank of Scotland Plc, said that "investors always favour the hub currencies when risk is selling off. If the data prints negatively and quantitative easing is reengaged at some point, then that would play negatively for sterling." Investors are moving away from stocks, commodities and other higher-risk assets on concerns that European government will struggle to cope the escalating budget deficits, as the U.S remain burdened by unemployment. The asset bubble that saw stocks rally over 50 percent since the March 3rd low is now beginning to burst, as central banks withdraw emergency stimulus measures. "From a technical perspective, the Pound's slide beneath $1.57 against the Dollar clears the way for a sustain downward move towards $1.55 over the coming weeks. The UK currency came under additional selling pressure, after a report from the Office of National Statistics showed that producer prices rose 3.8% in January, from a year earlier, the most since 2008. "The Pound may struggle to gain tractions against the Dollar over the coming week, as the focus switches to the Bank of England's quarterly inflation report on Wednesday. As well as updated growth and inflation forecasts, the report should provide further insights into last week's decision to pause its bond purchasing program," says Solomon. 
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| Last Updated ( Monday, 08 February 2010 11:34 ) |