Mixed Outlook on the Pound Persist
The outlook for the pound versus its euro and dollar pairs remains to be mixed even though the macroeconomic data in the United Kingdom for the last week was relatively stronger that what the analysts were expecting from it, which subsequently connotes that the economy was indeed in a better position to enter the second half of this year. With the foregoing, the remaining best strategy for the sterling bulls to gain or make profit is assumed to be to take positions against common currencies.
Meanwhile, the sterling was provided with a better foundation for beating the expectations from the efficiency of the manufacturing as well as services and even construction sectors. At the same time, some events in the region are also expected to bolster and boost the domestic economy like the Diamond Jubilee as well as the Olympic Games. Consequently, the Bank of England is expected as well to be a little bit less gentle in the coming days.
Moreover, another pressure came in for the euro in the past days since the Long Term Refinancing Operation or LTRO of the European Central Bank seems to be contributing a little in order to ease the credit contraction problem in the Euro zone, most especially in its periphery nations. The tension was even harder and worsened by the announcement from the central bank of Spain that the country needs further capital booster just in case that the condition of the economy further deteriorates. Well, this is because there are already many banks that are facing defaults as the country faces another recession in just two years.
On the other hand, if you will look into the sterling against dollar, it will be noticed that it seems that it did not move at all for the past 10 weeks already. Specifically, it has only been trading in the range of 300-pip for around $1.58, which is its 150-day exponential average already since the start of the month of February. With that, the cable, which refers to the exchange rate of pound versus the US dollar, seems to be trapped right now with a little hope of improving in the coming days because of an expected another weakness from the dollar.