USD/GBP Rate & Comments for 13th September 2010

USD/GBP - 1.547

Sterling fell on Friday against the US dollar and euro after uncertainty regarding the UK economy lead market analysts to recommend selling sterling. Thursday saw the UK post a record trade deficit and then Friday’s wholesale price inflation came in far weaker than expected which left many feeling that the Bank of England would not raise interest rates until well into 2011. Spending cuts were back in the spotlight as £4bn worth of welfare cuts were announced on top of the existing plans to cut the bill by £11bn. With October’s spending review on the horizon, traders expect it to be a close fought race between sterling and euro as fresh concerns circulated last week over the European banking sector. Many expect sterling to end up the weaker of the two after a real autumn chill seems to have taken a grip of the data coming from the UK. There is no real data released today, with all eyes on inflation figures tomorrow. Speak to a trader now to ensure you are protected.

In the USA, the US dollar fell in overnight trade as Chinese factory data was strong – despite efforts by the Chinese government to curb the buoyant economy and avoid an asset bubble. As a result, investors felt happier taking risks and moved funds out of US dollars and into ‘riskier’ currencies. In addition, risk appetite was boosted by the announcement of the new Basel rules on capital adequacy. Known as ‘Basel III’, the rules force banks to almost treble the amount of capital they must hold on reserve in order to avoid a repeat of the financial crisis. This clarification has helped investors feel more confident about the recovery. It is a quiet day in the USA too, with retail sales data released tomorrow that is likely to have a large effect.

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