USD/GBP Rate & Comments for 24th May 2010

USD/GBP - 1.441

Sterling recovered on Friday after a volatile week on the currency markets. With last week’s trading dominated by risk aversion related to Greece, the move by Angela Merkel to ban ‘naked short selling’ (selling assets that are not owned in order to profit from their fall in value) saw many investors rushing to buy back sterling and euro positions after having placed bets that they would fall. The pound has strengthened so far this morning and is currently up nearly 0.2% against the US dollar at $1.4480/ £1 and 1.16/ £1 (up 0.9%). On Friday we saw the budget deficit standing at £10bn for the month – the biggest ever shortfall for the month of April. This shows the scale of the task facing the new government, and even with the £6bn of cuts promised by the new chancellor, this is nowhere near enough. However, the cuts need to be finely balanced to ensure that they do not stifle growth – the reason why so many investors are negative about the pound. There is little data out today aside from some house price data. Get in touch now for a live exchange rate, as with the lack of news we could see sterling creep back up before the next piece of poor data.

In the USA, with risk aversion cooling over the weekend and this morning, the US dollar has fallen slightly against the pound. Risk aversion, where investors buy US dollar based government bonds (traditionally the safest asset class out there), has seen the US dollar strengthen nearly 12% against sterling since January and many wonder whether this has gone too far. Looking to the future, the US is likely to raise interest rates at some point this year, but recent forecasts show a very minimal increase by the end of 2010. The downward revision of interest rate forecasts shows that the USA is not yet in the robust recovery that many think. As a result, we could see further volatility as traders and investors reassess their forecasts for the pound/ US dollar as we go into the 2nd half of the year. Call in now for a quote.

Exchange rates change every second - call Smart Currency Exchange for a live up-to-the-minute quote. For individual requirements, visit the SmartCurrencyExchange.com website and for companies visit the SmartCurrencyBusiness.com website.