British pound sterling: UK currency continues to weakens vs AUD, USD but clings onto 1.24 vs EUR

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Published on Monday, 02 July 2012 08:37

Written by Will Peters

International Money Transfers at our sister site

"Further quantitative easing wouldn’t have a major impact on the Pound, as the market will have fully priced in the possibility by Thursday" - Adam Solomon at TorFX.

The pound sterling (Currency:GBP) remains unconvincing on the global forex space. This morning we see markets attempt to hold onto those strong gains registered on Friday; risk-on assets and currencies were in demand in line with demand for high-yielding assets, the safety of sterling was out of favour.

The pound euro exchange rate is 0.08 pct up on a day-to-day basis at 1.2405 at 9:25 AM in London. The pound dollar exchange rate is 0.16 pct down at 1.5681.

The pound to Australian dollar rate is 0.31 pct lower at 1.5300. (We publish the latest FX forecast news on our IMT site, access issued via this Facebook entry path).



"The Pound encountered support just below 1.57 against the U.S Dollar on Friday, as the improvement in risk appetite following the EU announcement on Thursday prompted investors to shun the Dollar in favour of higher-yielding currencies," says Adam Solomon at TorFX.

The UK currency held relatively firm against the Euro, trading just under 1.24 by the close of trading on Friday, despite widespread speculation that the Bank of England will sanction further quantitative easing this week.
 
In its latest financial stability report, the Central Bank remained uneasy over the financial sector and there will also be concerns that the Libor fixing row will maintain pressure for increased regulation. This could also have an impact in restraining lending and stifling economic growth.

The focus this week will remain on the BoE announcement this Thursday. 
 
"In the build up to the announcement, there may be added emphasis on the latest PMI manufacturing data this morning with a further decline likely to increase pressure on the Bank. There are also suggestions that further quantitative easing wouldn’t have a major impact on the Pound, as the market will have fully priced in the possibility by Thursday and other central banks also consider such action to increase stimulus," says Solomon. 
 
The Pound has weakened against the higher-yielding currencies, trading under 1.53 against the Australian Dollar and 1.95 versus the New Zealand Dollar.

Swings in risk sentiment will continue to have a significant impact on this market but the Aussie has also been gaining on speculation that the RBA will decide not to cut interest rates during the next meeting.