USD/GBP Rate & Comments for 1st October 2010

USD/GBP - 1.574

Sterling fell to a 4 month low against the euro yesterday after large flows related to the annual EU farming subsidy saw investors covering short positions after a surprise jump in orders for euros into sterling. The EU subsidy saw a large amount of euros moved into sterling, which caused sterling to drop. Once that had happened, many started taking advantage of the strong euro prices to move more euros into sterling, which saw a lot of speculators (who had been betting on a swift rebound) scramble to reverse their positions and avoid losing money. All in all, the effect of this was that sterling dropped from an earlier high of 1.1675/£1 to a 4 month low of 1.1535/£1. Despite this, sterling had a strong day against the US dollar – hitting $1.5920/£1 as house prices edged higher and Adam Posen (who earlier in the week stated that there should be more Quantitative Easing) said that he had not yet decided which way he would vote at the next Bank of England meeting. This eased concerns, but consumer confidence weakened more than expected. There is further house price data out today and manufacturing data. Call in now for a live exchange rate.

In the USA, following the news that Euro zone banks were relying less and less on bank funds, the US dollar dropped to a 5 month low against the euro. US dollar losses were limited though, as data showed stronger than expected business activity, lower unemployment claims and a 0.1% upward revision in 2nd Quarter GDP data. There is key manufacturing activity data today. Call in now for a live price.

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