Pound vs US dollar exchange rate's advance above 1.56 could be short lived warns analyst

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Published on Wednesday, 27 June 2012 09:59

Written by Sam Coventry

There will also be strong resistance at the 200-day moving average at 1.5749 and with the threat of further action from the BoE in the next week" - TorFX.

This morning we see the pound dollar exchange rate (Currency:GBPUSD) edging lower, the exchange rate is at 1.5617 at 10:55 AM in London. (For the latest FX forecasts please visit our IMT site, access is Free via this Facebook entry path).



"The Pound’s advance beyond 1.56 against the US Dollar (Currency:USD) may be short-lived with swings in risk sentiment playing a dominant role in the market. There will also be strong resistance at the 200-day moving average at 1.5749 and with the threat of further action from the BoE in the next week, it’s unlikely the UK currency will be able to sustain any upward momentum," warns Adam Solomon at TorFX.

The governor of the Bank of England Mervyn King said yesterday that his vote for more stimulus this month was because of his concern that the global economic outlook is worsening.

Solomon suggests that it could be argued that the Pound has been more resilient than you would expect following the BoE minutes because other central banks are also considering further stimulus measures.

Elsewhere, Chancellor George Osborne would have been disappointed to see the UK public sector net borrowing figure come in higher than expected, driven by a fall in income tax receipts and a jump in welfare benefits - symptoms of a double-dip recession.

Nonetheless, the news was equally bad from across the pond, with a US consumer confidence gauge hitting a five-month low.

"We have some UK CBI realised sales data out later this morning, which shouldn’t do too much to hurt the pound. Global Richard Driver at Caxton FX.

We note that the euro is getting a fair amount of support at current levels from Asian central banks but not enough to give this pair any upward momentum.

Italy will be auctioning some 6-month T-bills today and it will be interesting see what happens to yields, given how nervy the market is at present.