Pound To Dollar Exchange Rate Remains Under Pressure As Spain?s Debt Woes Deepen

Published: Wednesday, 6 June 2012 09:00 BST - Written by Frank Davies

STORY LINK Pound To Dollar Exchange Rate Remains Under Pressure As Spain?s Debt Woes Deepen

This week’s session has started with the emergence of further gloomy economic data and negative commentary from key international policy-makers, adding to the gloomy mood in the global currency markets.

Monday’s US Factory Order data for April built on the negative sentiment which surrounded last Friday’s US Non-Farm Payrolls figure, coming in well below analysts’ expectations. The data showed that number of new orders in US factories had shrunk for the second month on the trot. New business is the lifeblood of any firm, so the figure casts a dark shadow over America’s tentative economic recovery.

Elsewhere, the major risk event of yesterday’s session saw the Reserve Bank of Australia trim its key lending rate by 25 basis points, as per expectations. The RBA’s action means that Australian rates have now been cut by three quarters of a percentage point across the past two Reserve Bank meetings, signalling a sea change in policy. RBA Governor Glenn Stevens left observers in no doubt as to the reasons for the decision, alluding to the eurozone as a ‘potential source of adverse shocks’, whilst also commenting on ‘further moderation of growth in China’.

Meanwhile, Spain’s Finance Minister raised alarm bells when he stated, at yesterday’s G7 emergency summit, that global credit markets were ‘effectively shut’ as far as his country is concerned. It increasingly appears that, if Spain was a private enterprise, it would be trading insolvent and heading for administration. With domestic unemployment running at close to 25%, it would be safe to say that Spain is the ‘new Greece’.

The global financial system’s ongoing woes are proving supportive to one currency above all others – the safe-haven US Dollar. This fact saw the GBP USD exchange rate hold in the low 1.53s yesterday. However, there could be further pronounced downside to come for the pair if the negative mood amongst the investment community continues.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: American Dollar Forecasts Australian Dollar Forecasts Daily Currency Forecasts