ENM: Exchange rates: British Pound looks to move higher vs dollar
Four sessions on the slide has only amounted to a fall of 0.75% for sterling, suggesting that there is still further upside potential.
The Pound Dollar exchange rate is 0.012% higher with 1 GBP = 1.6070 USD.
The Pound Euro exchange rate is 0.069% lower on the day with 1 GBP = 1.1784 EUR at 8 AM in London.
The Pound Australian Dollar exchange rate is 0.230% higher with 1 GBP = 1.5875 AUD.
"The British pound slid against all but one of its 16 most-actively traded counterparts yesterday as an increase in Britain's tax levy on banks dented investor sentiment towards the UK," says Duncan Higgins at exchange rate providers Tor Fx.
The government said on Tuesday that it will impose the full amount of a planned levy on bank balance sheets this year, rather than phasing it in. Amid a quiet data calendar, the market focused in on the announcement taking the pound below €1.18 and $1.61 against the euro and dollar respectively.
Also in the news yesterday, China's central bank raised its interest rate for the second time in just over a month in its fight against stubbornly high inflation.
Surprisingly however, the market appeared unsettled with equity markets and commodity-linked currencies able to brush off the news. Until data from China shows evidence of tighter monetary policy (namely slower economic growth) fears should be kept at bay.
Looking at the Pound Dollar exchange rate we see that the pound spent its fourth day in a row on the decline against the US dollar yesterday, although downward movement remains protracted.
Four sessions on the slide has only amounted to a fall of 0.75% for sterling, suggesting that there is still further upside potential.
Yesterday’s drop came as a knee- jerk reaction to the higher bank levy and the market only focused in other the announcement due to the lack of any other data.
We are again seeing little in the way of movement between this pair this morning with the pound hold just below $1.61 as the market awaits a speech this afternoon from Fed Chairman Ben Bernanke.
Bernanke’s due to testify on the economic outlook and monetary and fiscal policy before the House Budget Committee. Recently his comments have put pressure on the dollar, as he’s reiterated the Fed’s stance to hold rates low for “an extended period.” Any similar rhetoric today would quickly return the US currency to the back foot, particularly amid speculation about the Bank of England’s announcement tomorrow.
