Sterling hits a 1-year high as the Dollar sell off continues

21/09/2012

By Andy Scott


Sterling made a brief high just over 1.63 on Friday morning, marginally above the high for 2012, which we saw back in April, despite the release of record Government borrowing figures during the month of August. This follows almost two straight months of gains against the US Dollar, leaving the Pound 5% higher over that same time frame.


As market expectations for more easing from the Federal Reserve increased over the last month, the Dollar weakened. With the Fed announcing last week an open ended programme of asset purchases and pledging to keep rates on hold until 2015, the Dollar could weaken further.

For Dollar buyers thinking of holding off, we would highlight the last time we were at 1.63 was in April when the Pound then dropped 10 cents in a month. Expectations then, like now, were that there would be no imminent policy of easing by the Bank of England which was quickly flipped when the bank signalled it may cut interest rates or increase its asset purchase programme again.

With the ECB standing ready to buy unlimited sovereign bonds, easing and stimulus measures having been announced by the Federal Reserve, the Bank of Japan and several other central banks expected to announce rate cuts in the coming weeks; it would be brave for an individual to expect no action from The Old Lady of Threadneedle Street.

Andy Scott, premier account manager at foreign currency exchange brokers HiFX

 

 

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