Pound Sterling Appreciates despite Bleak Forecast

June 28, 2016 - Written by John Cameron

STORY LINK Pound Sterling Appreciates despite Bleak Forecast

The Pound has been consistently in high demand for two days in a row, although the near-term may see Sterling drop off due to profit-taking.

Pound Sterling (GBP) Exchange Rates Recovered from Multi-Year Lows

The global markets returned to a semblance of normality today, following the wild price action during the final stages of last week and yesterday’s sessions. The Pound Sterling (currency : GBP) improved from the multi-year lows which it struck against both the US Dollar (currency : USD) and the euro (currency : EUR) during yesterday’s session, while UK stock indices recorded healthy gains.

London’s benchmark large cap FTSE 100 had jumped by almost 3.0% by just before the closing bell, while its sister index, the small to medium cap orientated FTSE 250, which gauges the performance of the next 250 largest listed British companies, was trading up by almost 4%. FTSE 250 companies tend to be more domestically orientated and less dependent on revenue booked in foreign currency, so their performance is generally less improved by a slump in the value of the Pound.

Current UK Chancellor of the Exchequer George Osborne stated in an interview earlier today that the UK finds itself, ‘in a prolonged period of economic adjustment in the UK, we are adjusting to life outside the EU and it will not be as economically rosy as life inside the EU.’ He went on to emphasise that, ‘we are absolutely going to have to provide fiscal security to people, we are going to have to show the country and the world that the government can live within its means.’

Improved US GDP Pushed Global Equities Higher

Meanwhile, another factor supporting the world’s equity markets on the day was the publication of official figures from the US Commerce Department upwardly revising its initial 0.8% estimate of US Q1 Gross Domestic Product to a much healthier quarterly 1.1%. The Commerce Department noted in its accompanying statement that,

‘The increase in real GDP in the first quarter reflected positive contributions from personal consumption expenditures (PCE), residential fixed investment, state and local government spending, and exports that were partly offset by negative contributions from non-residential fixed investment, private inventory investment, and federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased’

Analysts forecast that while America’s economy continues to show signs of healing from the 2-007-09 global financial crisis, the Pound Dollar exchange rate is likely to continue falling.

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TAGS: American Dollar Forecasts Euro Forecasts Pound Sterling Forecasts