Cable Should Go Down

Posted on March 26, 2009 by Yohay
Filed Under Forex Opinions | Leave a Comment

GBP/USD had a nice rally in the past week. It happened despite bad fundamentals. It seemed to have reached the ceiling but still hasn’t fallen. It should go down.

The British economy saw lots of bad figures lately. Clairmount Count Change was very disappointing last week. It recorded 138,000, much more than early expectations. This hurt the Pound, and sent GBP/USD under 1.40.

But on the same day, the FOMC Dollar Printing Statement came out. The Pound gained, as all other currencies, but it didn’t go down since.

This week, and especially today, bad data hit the Pound. For the first time since 2002, the government failed to raise the money in a bond auction. This is very worrying – the government finds it hard to borrow money for its deficit.

In addition, Retail Sales, which were expected to drop slightly, by only by 0.3%. But the real figures were devastating: Retail Sales fell by a shopping 1.9%! That’s a very bad sign for the British economy. You can the CBI Realized Sales to that. Expectations were for a fall of 35 points, but it went down by 44.

The only good signs for the Pound were the rise in prices. Lower interest prices might have taken their toll: CPI rose by 3.2% (annually adjusted) – more than 2.6%. I don’t find that convincing for a rise in the Pound.

GBP/USD now trades at 1.45. Still high. Too high. I would expect it to be under 1.40. Or find a good explanation to why it’s still so strong. Any suggestions?

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