British pound sterling: UK currency runs into strong resistance against US dollar, but tensions in Eurozone could renew demand for GBP

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Published on Monday, 20 August 2012 08:54

Written by Rob Samson

International Money Transfers at our sister site

"Developments within the Euro-zone will be watched closely over the coming days and further political tensions could trigger renewed demand for Sterling" - Adam Solomon at TorFX.

The pound sterling (Currency:GBP) is hoping to hold onto last week's gains this morning, however news from Rightmove concerning property prices has proved worrisome.

The pound euro exchange rate is 0.009 pct in the red at 1.2711.

The pound dollar exchange rate is 0.08 pct higher at 1.5707.


The pound to Australian dollar currency pairing is 0.32 pct down at 1.5007.

"The Pound encountered strong resistance in the region of 1.5720 against the U.S Dollar on Friday traded weaker through the course of the day to find support at 1.5650, as underlying selling pressure was contained," reports Adam Solomon at TorFX.

The Pound also found support in the region of 1.2730 versus the Euro, amid a slightly more optimistic tone surrounding the UK growth outlook with some expectations that the second quarter GDP data would be revised higher.
 
Solomon points out that the domestic data scene is sparse, although the Rightmove house price index did reports a 2.4% decline in home values for August, which maintained the sense of unease over the UK property market.

Solomon says that investors are likely to focus on broader global issues as we head into the final ten days of August, this could prove positive for sterling:

"There is, however, still a high degree of uncertainty surrounding the situation and overall sentiment remains very fragile, especially with uncertainty in the Euro-zone economic and political outlook.

"Developments within the Euro-zone will be watched closely over the coming days and further political tensions could trigger renewed demand for Sterling. The highlight this week in terms of UK economic data will be Friday’s release of the second estimate of second quarter growth domestic product.

"An upward revision to the quarterly growth figures would provide a boost to Sterling, as the preliminary estimate showed the economy had contracted by 0.7% during the second quarter. Nonetheless, the economy will have still contracted for a third consecutive quarter so gains could be limited."