Pound Suffers a Week of Weakness
|Published: ||22 Oct at 9 AM|
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Sterling looks to end the week with a little more optimism for the future, but with sack-full’s of economic data weighing on the UK’s chances of growing from recession I have little in the way of confidence for the hopes of the ailing pound.
GBP – EUR hit a near 7 month low on Thursday after weak UK retail sales data increased concerns that Bank of England policy makers may opt to inject more stimulus into the faltering economy.
The resilience that sterling has shown since the decline of Northern Rock in September 2007 (where does the time go?), may now not have much weight behind it as it continues to get punched from all angles, retail sales being one such example.
The report showed that sales fell unexpectedly for the second month in a row in September, lending weight to the view that they UK economic recovery has peaked, if it ever started in the first place.
This data further dented the pound, which has come under pressure this week since Wednesday’s BoE minutes which showed that Adam Posen called for a resumption of stimulus through quantitative easing.
Prices of sterling have continued to slide down versus the euro, as low as 1.1203 yesterday and with many analysts predicting a further decline, as the pound weakens and the ever ready euro looks to strengthen we may be set for rates well below the 1.10 price.
The euro has benefitted from US$ investors taking money and looking for an alternative safe haven. Despite the riots on the streets of France, and other economic frailties the euro zone is showing that there is some proof that safety in number seems to work. This may now provide the euro the stepping stone towards continued strength, and ultimately recovery?
Markets across the globe will remain turn cautious going into the weekend, with tensions building as the finance ministers for the G20 group gather in South Korea for meetings over today and tomorrow.
There is talk that some sort of currency agreement might be thrashed out at meetings. However, this seems unlikely, which could leave the dollar under renewed pressure going into next week.
Aside from the German IFO index for October, there are no data releases of note from the US, UK or Euro zone today.
With plenty of doom, it may not be wise for any sterling sellers to look at the market through rose-tinted spectacles, and secure any immediate transfer soon.
If however you are looking to buy into the pound, you can currently benefit from some fantastic prices.