USD/GBP Rate & Comments for 3rd August 2010

USD/GBP - 1.595

Sterling continued to strengthen against the US dollar and euro yesterday after the FTSE jumped by 2.5% following strong earnings data from the banking sector. Sterling hit a 6 month high of 1.5950/£1 against the US dollar and a 4 week high of 1.2111/ £1 against the euro. Shares in Europe’s largest bank HSBC jumped by 5.2% after first half profit more than doubled to $11.1bn – significantly beating expectations. The strong results helped drive appetite for riskier currencies as strong performance from HSBC showed evidence of a healthy banking sector, and given the banking sector’s contribution to the UK economy this in turn drove demand for sterling. Data on the UK manufacturing sector came in better than expected, with demand and employment higher than expected. Later today, there is data released on house prices and construction sector activity which are expected to show a mild decline on last month. House price data has been relatively poor over the last few months, but one report out today suggested that house prices would rise by 20% over the next 2-3 years. Call in now for a live exchange rate.

In the USA, the US dollar fell broadly against both sterling and the euro as risk appetite saw investors relinquish ‘safe haven’ US dollar holdings in favour of riskier assets. Relatively poor US data over the last few months has left the US dollar reeling – especially after the poor GDP data last Friday. Manufacturing and construction data were positive today, but analysts feel that the US dollar is rebalancing against sterling. After a sustained period where the price of the pound has reflected disaster in the financial sector, today’s HSBC results have for many seen that risk disappear. Whilst this is not strictly true, a return to a strong banking sector in the UK is a very good thing – let’s hope it isn’t just a flash in the pan. Call in now for a live price and to ensure you are taking advantage of strong prices.

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