Sterling falls short of $1.60

Published on in Currency Exchange News by

Sterling climbed to a six month high against the US dollar, falling just short of the $1.60 mark on Friday as investors ditched the dollar after weaker than expected US non-farm payrolls figures.

The figures showed the US economy shed twice as many jobs in July as economists had expected, adding to concerns about the US economic recovery and sparking talk the Federal Reserve may resort to further monetary easing to prop up the economy.

This pushed the pound higher as investors shrugged off earlier weak UK industrial production data.

Sterling rose 0.6% against the dollar to $1.5999, just below the key resistance level of $1.6000, where traders reported options barriers.

“There’s been pressure on the dollar as payrolls disappoint once again and $1.6000 seems to be the magnet now,” said Richard Wiltshire, chief foreign exchange dealer at ETX Capital. “The market has shaken off the concern about the disappointing UK numbers from this morning, and it would appear that the uptrend is still intact.”

The pound broke through resistance at $1.5968, Tuesday’s six-month high which also marked the 61.8% Fibonacci retracement of its 2009 to 2010 decline.

The US dollar fell further against the euro, at 3.00pm the euro had climbed to $1.3322 its highest since late April. As the dollar weakened more against the euro than the pound this had the effect of the pound weakening against the euro.

At the same time as the euro’s high against the dollar, the pound fell to a session low against the euro of €1.2005. Despite the fall, the pound’s trade weighted index edged up from Thursday’s close to 82.4. A move above 82.7 would mark its highest in more than 11 months.

The US jobs data put the market focus back on selling the dollar, bringing the pound back into positive territory.

It had fallen as low as $1.5840 earlier in the session following data showing an unexpected fall in UK industrial output during June.

British industrial output fell 0.5% in June after an earlier-than-usual start to seasonal oil field maintenance work, partially reversing May’s 0.7% rise and confounding forecasts for a 0.2% increase.

Further data showed UK input price inflation picked up much less than expected, which analysts say may increase concerns at the Bank of England about rising inflationary pressures. Inflation is currently well above the target rate of 2.0%, with no sign of it falling in the short term.

Next week, the focus for sterling will shift to the central bank’s quarterly projections on growth and inflation on Wednesday, where traders will be looking for clues on whether policymaker support for hiking interest rates is strengthening.

“The risks are that the BoE could highlight downside risks to the economy in the quarterly inflation report,” said Kenneth Broux, market economist at Lloyds TSB

Recent Posts

» «

Comments are closed.

TorFX

© 2018 Foreign Exchange Rates : All Rights Reserved : For Free Money Transfers