View from the Trading Desk

Our head trader gives his insight on this week’s major currency movement.

GBP/USD is back well over 1.50 and has jumped over 1.52 a couple of times this week as U.S. data released has been fairly sluggish. The big factor that pushed the rate back over 1.50 was Ben Bernanke’s comments in the FOMC minutes indicating that he was prepared to carry on with the policy of monetary easing, which contradicted his comments a few weeks ago when he appeared to hint that this policy might be drawing to a close by the end of the year. We have seen this from Bernanke before making a statement that he is going to end quantitative easing (QE) and then a few weeks later changing his tune, every time he does this the markets overreact and you would think that they would have learned by now not to invest so much faith in the words of central bank governors.

The move upwards was also helped by the Bank of England minutes indicating that the board voted 9-0 against additional stimulus, which was a positive boost to Sterling as many thought new Bank of England governor Mark Carney would start to throw money around like confetti. Perhaps this is a case of the calm before the storm and I am sure he has some plans in mind for further QE in the future.

As we said last week a correction in GBP/USD was on the cards as it has moved downwards too quickly to sustain those levels of 1.48/1.49 without the Federal Reserve acting. The moves over the last two weeks do give a good insight into currency movements and just how volatile the markets can be. In real terms the rate is in the same position it was in at the start of July but the opportunity to lock in rates at below 1.50 was available for 4 days. This is where specialist currency firms can add real value to your conversions by allowing you to fix the rate of exchange for a particular day in advance of receipt of your funds.

The rate is still at decent levels for USD sellers, when compared with where it has been over the last 6 months and I would expect it to remain in the range of 1.50-1.53 for the next week or so. Most of the data out over the next week is quite light with only the UK GDP figure, out next Thursday , to be too concerned about. If you would like information on any other currency pair please do not hesitate to contact a member of the team.


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