Foreign Currency Exchange

The Pound faired well across the board last week and indeed this was no different against the Greenback. The major news toward the end of the week was of course the Non Farm Payroll, the key unemployment data in the US. The loss of 540,000 jobs reported in December led to an accumulative loss of 2.589 million jobs in 2008, the highest figure since like for like records began after WWII.

This data, coupled with the highest unemployment rate in 16 years at 7.2% was of course damning news for the USD, but the fall against Sterling was not as far as many would expect. In fact the Dollar even had a slight rally on the back of this news, purely because traders now feel that with interest rates effectively at zero, there is nothing further the Fed can do to negatively affect the markets by cutting rates so the data is merely swatted aside and ignored. Therefore the overall effect was that the GBP/USD rate closed over 4% up at 1.5161, from 1.4545 a week earlier, benefiting those converting Sterling to US Dollars.

This week sees a busy US calendar including retail sales on Wednesday and consumer prices on Friday. Further signs of deteriorating economic conditions could undermine support for the US Dollar, although the key now to affecting the USD comes from the rhetoric and policy of the decision makers in Washington, especially in the run up to President Obama’s inauguration. Fed Chairman Bernanke is in London this week speaking on the financial crisis and policy response and this will be watched especially closely. Any more negative talk from Bernanke could prove a positive for all Dollar Buyers from the UK. Call in and speak to an FCG trader for further information.