British Pound Sterling

The pound sterling (Currency:GBP) is in favour today in line with deteriorating risk sentiment, it would seem that investors are turning to the pound for its safe-haven qualities once more.

The pound euro exchange rate is 0.15 pct higher at 1.2748.

The pound dollar exchange rate is 0.03 pct higher at 1.5700.

The pound Australian dollar exchange rate is 0.22 pct down at 1.5022.

This morning we see RBS have advised that the upside in the pound dollar rate are likely to be capped:

"GBP/USD has lagged recent equity market gains, with the 200d moving average, and recent highs at 1.5768 and 1.5776, providing strong levels of resistance. The UK/US 5yr swap spread has moved in favour of the USD as better US data has raised questions marks over the need for more QE from the Fed.

"In this context this week’s FOMC minutes will be a focus but more important is likely to be Bernanke’s speech at Jackson Hole on 31 August. Any indication that the Fed isn’t ready to do more QE is likely to lead to a firmer USD and can play negative for wider risk sentiment."

RBS are forecasting a rate of 1.56 for GBP-USD in September, this falls to 1.54 in December and 1.52 in March 2013.

Looking at the immediate market conditions, this week’s economic releases include Tuesday’s public finance data and Friday’s Q2 GDP figures (first revision), the latter of which are expected to show an improvement from the initial print of -0.7% q/q.

"GBPUSD is currently at the upper end of its two month range, near 1.5700, having fully retraced its losses from early August. Meanwhile, Andrew Sentance, a former member of the BoE’s MPC is arguing against further monetary stimulus and is in favor of a greater allocation of government spend- ing toward infrastructure and education," says Eric Theoret at Scotiabank.

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