Foreign Exchange: Pound Close To Support Levels Against US Dollar
Published: 13 March 2012 By Peter Thompson Leave a Comment
The Pound continued to trade lower against the US Dollar yesterday and is likely to test support levels in the area of 1.5550.
The Pound fell yesterday as a result of a decline in risk appetite as well as the US Dollar gaining strength as US economic data came in better than expected – raising optimism that that the Federal Reserve won’t add to quantitative easing measures this month. .
Whilst the Pound edged towards 1.57 by the close of foreign exchange trading last night, it was unable to regain significant support and fell away during the Asian trading session.
UK stocks were broadly unchanged yesterday, with the FTSE 100 Index consolidating following a three-day slump.
The Dollar also gained strength, as U.S economic data came in better than expected and boosted optimism
The Pound was also on the defensive against the Euro, trading under 1.19 at one point. It seems likely that there will be a further move lower to test near-term support around 1.1760.
There was a distinct lack of UK economic indicators released yesterday but the latest RICS house price survey recorded a figure of -13 from -16 previously, reinforcing stagnation within the sector. However, the house price index has risen to the highest level in 19-months, it’s reading below zero indicates that more surveyors are reports price declines than gains last month.
With optimism over the US economic outlook, the Euro remained under pressure against the US Dollar, finding support in the region of 1.31 Given the improved sentiment towards the US economy it’s unlikely that policy makers will loosen policy any further.
In Europe, there was relief that the Greek debt situation had been resolved, even though there’s a lack of confidence in the medium-term outlook. This, couples with speculation that Portugal will be the next EU nation dragged towards default over the coming months, means the Euro may struggle to gain momentum in the short-term.
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