Dollar at August lows against British pound, GBP-USD forecasted to hit 1.6 level

Details

Category: Exchange Rates

Published on Wednesday, 05 September 2012 14:29

Written by Will Peters

The pound (Currency:GBP) has hit inter-month highs against the US dollar (Currency:USD) as we approach what is forecasted to be an unremarkable Bank of England policy decision.

GBP-USD is 0.22 pct higher at 1.5909. The currency pair is forecasted to head towards the 1.6 level, however this will prove to be a significant resistance point.

Tomorrow the Bank of England MPC will announce their decision on monetary policy. The majority of commentators and analysts are expecting no change.


This is a profoundly positive scenario for sterling as investors will seek out its safety in an environment of uncertainty surrounding other banks, particularly the ECB.

"The Pound edged above 1.59 versus the U.S Dollar again on Tuesday, equaling Augusts high, but was unable to sustain the move last night, settling at 1.5850," notes Adam Solomon at TorFX.

The UK currency did advance towards 1.2650 against the Euro through the day, as underlying sentiment held firm and speculation increased that the ECB would be more likely to take action on Friday than the Bank of England.

In terms of economic data, the latest construction PMI didn’t follow the same pattern as the most recent manufacturing data with the result weaker-than-expected for August, with a decline to 49.0 from, 50.9 the previous month.

The data will maintain concerns over the construction sector and the UK economy as a whole.

There was a leaked report that the services PMI index for August was stronger-than-expected with a reading of 53.7, from 51 the previous month, a figure that was quickly confirmed by the source ahead of the scheduled release the morning.

The services data was not important in providing net support for Sterling with hopes that the third quarter trend for the economy would be stronger-than-expected.