Good news then bad news for sterling
Currencies Direct November 11th 2009 - 2 minute read
A busy day in the markets this morning for economic data from the UK. Firstly we kicked off with UK October jobless claims and ILO unemployment rate; the jobless claims came in better than expected and the unemployment level came in at 7.8% against a forecast of 8%. Initially the pound hopped higher towards 1.68 on the USD and 1.12 against the EUR as the market responded to the improvement; however it still had an eye on the Bank of England inflation report to follow. This report was more dovish than anticipated and the door was left wide open for more QE when the markets were looking for signals on a conclusion. King also noted that weaker sterling will help exports indicating that the drop in sterling is not a concern but a benefit. This led to a drop in sterling across the markets and once again the BoE’s dovish tone is holding sterling back.
It will be interesting to see how GBP/USD trades following this data as the USD is still under pressure. The bull run towards 1.70 technically remains intact and on the upside there is not too much resistance in the path of 1.70. If GBP/USD can hold above 1.66 then it should stay in a positive mode against the USD despite the negatives from the BoE. Regarding the weak USD we are getting mixed messages from the US with Tim Geithner backing a stronger USD and at the same time Federal Reserve Bank of Dallas President Fisher stating that the USD is undergoing an orderly depreciation. The dollar is certainly on a downward trend and shows no sign of bucking this trend at the moment.
GBP/EUR has frittered lower following the inflation report back into the 1.10 levels, the euro has continued to push higher against the USD beyond 1.50 giving the euro good support.