Foreign Exchange Currency Outlook : Pound Dollar GBP USD Rate and Euro Dollar EUR USD Rate Rise to 16 Month Highs on US Oil Inventory Figure

21 Apr 2011 at 7 AM - Written by John Cameron

STORY LINK Foreign Exchange Currency Outlook : Pound Dollar GBP USD Rate and Euro Dollar EUR USD Rate Rise to 16 Month Highs on US Oil Inventory Figure

The Pound Euro exchange rate (GBP EUR) is 1.1277. The Pound Dollar exchange rate (GBP USD) is 1.6433.

The global economic recovery was given a fillip yesterday when US data, released at the start of the North American session, showed that American crude oil inventories have been depleted by a significant amount during the past month, suggesting that the US manufacturing base is moving forward well. Oil analysts had expected the figures to illustrate that US oil stocks had grown due to patchy demand.

The figures helped global stock markets register a day of gains, with the FTSE 100 closing up by over 2% and the S&P 500 seeing gains of 1.35% on the session. The positive performance for equities continued in Asian markets overnight with the Hang Seng and Nikkei 225 both moving forward.

The main loser from this advance in appetite for risk has been the US Dollar, as institutional investors show increasing confidence and shift their funds out of the safe haven of US T-Bills. Yesterday saw the EUR USD continue its bull run which has seen it rise from 1.2874 in the second week of the year to touch 1.4582 yesterday, its highest level since December 2009.

Meanwhile, the Pound also rose to its highest level against the Greenback since December 2009, with the GBP USD rate climbing to 1.6448 during yesterday’s session. Sterling gains would surely have been greater were it not for the release of the minutes of the most recent Bank of England Monetary Policy Committee meeting yesterday morning.

The BoE minutes showed that none of the six members to vote against an interest rate rise at March’s meeting had joined the three known hawks, (Sentance, Weale and Dale), in voting for a rate hike at this month‘s meeting. The narrative of the minutes caused further selling pressure on the Pound, stating that a tightening of monetary policy in the near-term would, "adversely affect consumer confidence, leading to an exaggerated impact on spending". Investors downwardly revised their expectations for a rate hike in the net twelve months accordingly.

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