USD/GBP Rate & Comments for 6th May 2010

USD/GBP - 1.503

Sterling was very much caught in the middle yesterday as concern over the Euro zone debt crisis caused the pound to jump to a 9 month high of 1.1770/£1 against the euro, but fall against the US dollar to hit a 5 week low of $1.5068/ £1. Fears that the debt crisis would spread to other European countries made sterling a relatively better investment than the euro, and with the polls opening today, the pound suffered against the US dollar as the latest opinion polls showed that no party had a clear majority going into the election. The US dollar strengthened as investors bought into the perceived relative safety of the US currency ahead of the uncertainty of the UK polls. One analyst stated that in order to see a large gain against the US dollar, we would need to see a sizeable Conservative majority on Friday morning. Data out today did show that the UK construction sector is recovering at a better rate than expected, but this did little to help the pound stabilise against the US dollar. The big news today is clearly the election and the Greek situation. Expect volatile trading against the US dollar off the back of the first exit polls later in the afternoon and continued volatility throughout the day against the euro. Call in now if you need to buy currency over the next few days as tomorrow could be more than interesting on the currency markets after the election.

In the USA, stock markets suffered on the ‘contagion’ fears with the Dow Jones and the S&P 500 markets dropping by around 0.3% each in early US trading. The US dollar rallied as a result of the panic selling of other ‘riskier’ assets such as the euro and sterling as investors moved into the relative safe haven of US government bonds, increasing the demand for US dollars and driving the value of the currency up. US fundamental data came in relatively strong as well, with ADP non-farm payroll showing a better than expected increase in the number of jobs added to the US payroll in the last month. Data in the USA is light tomorrow, but expect continued trading on sentiment towards both sterling and the euro. Get in touch now for a price – especially as we are approaching the $1.40s against the pound again.

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