The pound fell to a near 3 year low against the dollar last Friday, with sterling falling to as low as US$1.4858 before rising back up to US$1.49, as markets displayed pessimism about UK interest rates rising above 0.5% any time soon, coupled with the now recovering US economy which has been bolstered by news of US employment growing by 195,000 jobs in June alone.
Written by Chris White
Trading closed at only 1/5 of a cent above the low mark seen in March of US$1.4831, – the weakest level since June 2010.
The new US jobs data also wrongfooted most estimates over the previous 2 months, by showing a rise of 70,000 more jobs than previously predicted, thereby igniting further speculation that the Federal Reserve is poised to raise US interest rates over the next 12-18 months.
The new data comes amid the Bank of England’s first statement with Mark Carney as the bank’s governor last Thursday, which was issued with no changes made to the bank’s 0.5% interest rate level or Quantitative Easing programme of buying up UK sovereign debt.
The decisions which included the Bank of England’s flat-rating of interest rates were also made at the first meeting of the Bank’s Monetary Policy Committee with Carney in charge.
Managing director of foreign exchange forecaster Argentex Harry Adams called the timing of the statement “significant”, stating: “This statement suggests that further quantitative easing is likely and interest rates will remain low for the foreseeable future. Despite the recent improvement in economic data from the UK, the pound is being beaten up by global investors as the view is that the British currency will continue to offer very little return of interest.”
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