Pound to Dollar Exchange Rate (GBP/USD) Spirals to Fresh Best Currency Rate Since Aug 2009 - Investors Ask Why?

May 7, 2014 - Written by Tim Boyer

STORY LINK Pound to Dollar Exchange Rate (GBP/USD) Spirals to Fresh Best Currency Rate Since Aug 2009 - Investors Ask Why?

The Pound to US Dollar exchange rate (GBP/USD) stole the show during yesterday’s session (6th May 2014), spiking to its highest level since August 2009 during the middle part of the day. The move up to 1.6996 GBP/USD for the Pound Dollar exchange rate left many analysts scratching their heads and asking the same one word question...‘why?’…

The latest Pound Sterling to US Dollar exchange rate is trading up +0.06% at 1.69639 GBP/USD as of 10:00 08/05/2014.

There were no US data releases of significance and no new statements from American policymakers to alter the relative value of the Buck. The shift out of the Greenback was instead driven by better than anticipated Purchasing Manager Index surveys of the Spanish and Italian service sectors which caused the euro to push ahead against the Dollar, sending the euro Dollar exchange rate up to its highest level for two months EUR/USD. The attendant arbitrage plays from investors meant that the Buck’s weakness against the single currency was mirrored in a forward move for GBP USD.

The creeping suspicion amongst analysts that the Dollar is growing increasingly unresponsive to positive US data releases provided further forward momentum for GBP/USD on the day. Last Friday brought the publication of a highly encouraging set of US labour market data which ostensibly revealed a very strong level of job creation and a pronounced drop in the overall level of unemployment in the States last month. Investors appeared to discount these numbers following a raft of commentary from industry experts which suggested that they did not tell the full picture about the state of America’s employment market. Market participants also appear increasingly convinced that the US Federal Reserve is on a set path to taper its Quantitative Easing programme down to zero by the Autumn regardless of the relative strength or weakness of the data released.

A further factor anchoring the Greenback is its apparently diminishing usage as a safe haven currency. Global appetite for risk ebbed yesterday over fears that the situation in Ukraine might deteriorate, however it was the Yen which hovered up the safe haven support which the Buck would once have enjoyed, sending the Pound Yen exchange rate down to 172.22 GBP/JPY on the day.

For more exchange rate forecasts or to compare exchange rates for an international money transfer, please refer to the main Currency News UK website.

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