Last week saw some relief for Sterling as risk appetite briefly returned to the market, causing investors to move away from the safe haven Dollar as the Pound fought back to a level of 1.55 on Friday. However, the revival was short lived. In the run up to Thursday’s interest-rate announcement from the Bank of England, rumours of a full 100 basis point cut devalued Sterling on Monday morning. The result was the worst day for the Pound against the Dollar in 16 years, since the UK dropped out of the ERM, as we saw over a 5 point drop in the GBP/USD Cross.

The main news affecting the cross this week is likely to be the interest rate decision from the Bank of England. If the central bank cuts its rates by the 1% expected, we could see a move into the 1.40s as investors move away from the low yield of Sterling. In contrast, Friday may also see the Dollar weaken as the non-farm payrolls and unemployment data for November are released, which are both predicted to show signs of a contracting economy and job losses.

Across the Atlantic, congress appears to be nearer to putting forward another rescue package for the automobile industry, and President-Elect Obama’s executive team is taking shape, with news that Timothy Geithner is set to become the new Secretary to the Treasury providing support and reassurance to the US economy.

Given the volatile nature of the cross, it is essential to speak to your account manager at FCG to ensure you purchase your currency at the best time.