USD/GBP Rate & Comments for 7th May 2010

USD/GBP - 1.462

Sterling has had a rollercoaster ride over the last 24 hours. We saw it hit 1.1860/ £1 at one point yesterday, before falling to a low (at the time of writing) of 1.1532/ £1 as sterling goes into freefall this morning as current predictions point to a hung parliament. Against the US dollar, the pound plunged as the first exit polls were released at 10pm last night and hit $1.4598/ £1 – the lowest level in over a year. Sterling is currently trading at $1.4710/£1, but could drop considerably further depending on how the day develops. The huge volatility was as a result of panic selling as concerns over the spread of European sovereign debt sent shockwaves through global markets. This panic hit stock markets and at one point yesterday in the USA, the Dow Jones was down over 1000 points – the most since the height of the credit crunch. The FTSE slipped over 5% and is on track for the biggest weekly fall since March 2009. With current results showing that a hung parliament is the most likely outcome of the election, sterling took back gains made against the euro yesterday. With complete uncertainty as to who will be the next prime minister, especially with Gordon Brown seemingly keen to cling onto power despite a huge swing to the Conservatives. Call in now for a live price, as a lot could happen over the course of the day.

In the USA, the Dow Jones recovered slightly after posting a 1,000 point drop yesterday and VIX (a measure of volatility in global financial markets) spiked above 40 for the first time since autumn 2008, when panic over Lehman Brothers caused huge movements across all asset classes. This shows the gravity of yesterday’s situation, as panic over Greece and concerns over the UK’s political situation saw investors flock to US government bonds which also saw interest rates paid plummet as demand for the ‘safe’ assets spiralled. Today we have non-farm payroll in the USA, which still has potential to cause further movement, especially if it comes in at anything more or less than expected. Call in now for a price on US dollars, as we could see absolutely anything happen in the next few days.

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