dollars to pounds

Pounds to Dollars Chart 10 Aug 2010

Yesterday’s price action on the pounds to dollar forex chart once again stopped short at the USD1.60 before the currency pair fell sharply to a low of USD1.5710 following release of the RICS house price data which confirmed a slowdown in the UK housing market with only the 14 day moving average preventing a further fall of the pounds to dollars pair.  Today, of course, the markets have been waiting for the FOMC interest rate decision and statement which confirmed that the FED will be resuming its programme of quantitative easing in an attempt to inject some life into the US economy.  The FED’s version involves buying mortgage backed securities which is ironic given that this financial mess started with subprime mortgages in the first place.

From a technical perspective the daily chart for the pounds to dollars pair still remains positive despite the recent failures at the USD1.60 price point and with the usd index still looking extremely weak we can expect the pair to move back towards this level once again.  From a fundamental point of view sterling may also get a boost from tomorrow’s from the unemployment data and the BOE inflation report which is expected to show that the Bank will not be able to keep to its remit of  a 2% inflation rate.  The only caveat to this view is that should the market begin to lose faith and patience with the BOE’s handle on inflation (too many letters explaining why the Bank keeping missing the 2% target) it will sell sterling thereby pushing up the yield on 10 year gilts, so an interesting and busy day tomorrow for the pounds to dollars pair.

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BOE inflation excuses begin to wear a bit thin