British pound sterling: UK currency in a come-down as investors start buying stocks, can GBP-USD hold ground?

Details

Published on Friday, 17 August 2012 09:31

Written by Rob Samson

International Money Transfers at our sister site

The pound sterling (Currency:GBP) is calming down after a couple of good days in the FX space prompted by some decent eco-stats.

The pound euro exchange rate is 0.27 pct down on yesterday at 1.2696 as investor confidence pulls the euro forward alongside regional equity markets.

The pound dollar exchange rate is 0.09 pct in the red at 1.5719.

The pound to Australian dollar rate is 0.46 pct higher at 1.5042. The Aussie is lower across the board as investors stress about the potential of an interest rate cut at the RBA.


It would seem that the positive data releases of the past week are now falling back into memory for sterling which has this morning found little support.

In figures released on Thursday, UK retail sales came in at 3.3% y/y versus expectations of 2.0%. Core retail sales also surprised to the upside at 0.3% m/m, or 2.8% y/y.

"Our UK economists note that retail sales data could be quite volatile over the next couple of months because of the Olympics and weather. The data, nevertheless, supports the UBS view that the economy will bounce back in Q3 with GDP growth of +0.5% q/q" says Gareth Berry, FX Strategist with UBS.

Meanwhile, S&P reported its UK baseline real GDP growth forecasts for 2012 and 2013 at 0.3% and 1.0%, respectively.

It also noted that UK banks could see a further deterioration in asset quality in the second half of the year.

In the meantime analysts are asking whether the pound can hold its gains against the US dollar.

Michael Derks, chief strategist at FxPro says:

"Elsewhere, the pound is looking a little more solid this week after some perky pieces of economic data. Cable traded above the 200 day moving average yesterday, with the 100 day moving average not that far away at 1.5756.

"It will be interesting to see whether cable can sustain a move above the 200d – this will be the fifth test in the past three months. On the previous four occasions, cable failed to penetrate in a meaningful way and subsequently fell back."