Sterling pares losses after suprise data

Published on in Currency Exchange News by

On Friday sterling was given a helping hand to pare losses made the previous afternoon after positive producer price index data rose twice as fast as expected in September. It also goes some way to reduce expectations the bank of England will need to add extra stimulus to the economy in the form of quantitative easing.

“At the margin, the producer price data make the (Bank of England Monetary Policy Committee) more reluctant to revive quantitative easing in the near term at least, although the key factor on this will be just how much growth slows and how tight credit conditions remain,” said Howard Archer, Chief European Economist at IHS Global Insight.

In Thursdays Asian trading the pound traded fairly steady against the euro at the five month low of €1.1361 level but after the data managed to push through the €1.14 mark to eventually hit the days high of €1.1466.

Against the dollar sterling fell from the 8 month high of $1.6017 achieved on Thursday to reach the days low of $1.5825 before ending the days trading near the high of $1.5952.

“Sterling clearly wasn’t comfortable above $1.60 and I think it will struggle to get back above,” said Adrian Schmidt, currency strategist at Lloyds Banking Group.

Elsewhere the dollar continued to feel the pressure after weak US payrolls data increased market views that the FED would increase their asset buying policy within the next few months. The data showed employment fell by 95,000 in September and private hiring slowed.

“The weak U.S. numbers saw the yen, euro and sterling all rise against the dollar,” said Mark Oswald, FX and rates strategist at Monument Securities.

“But the pound will struggle as risks of quantitative easing will weigh and once investors are done with selling the U.S. dollar they could turn to sterling.”

The euro also made losses after Eurogroup chairman Jean-Claude Juncker said the euro was currently too strong, he said he was not happy with the euro’s rise to $1.40 against the dollar. This followed on from Trichet’s comments made the previous day that they hoped for a stronger dollar overall.

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