Exchange rates are predominantly driven by expectations for economic growth and interest rates although technical analysis is an increasingly important, but often poorly understood influence on price action, so what follows are definitions and explainers for some of the terms most frequently encountered by Pound Sterling Live.
Pound Sterling was put on the backfoot Friday after the ONS reported UK retail sales slumped in December, surprising a market that had been prepared for modest growth and adding to expectations that the Bank of England would cut interest rates on January 30.
The British Pound has traded with a firmer tone against the Euro, Dollar and other major currencies in the second half of the week as markets are unwilling to bet a Bank of England interest rate cut at the end of the month is certainty.
The British Pound is being tipped to remain under pressure over the near-term as foreign exchange markets sell the currency in anticipation of a January 30 interest rate cut, but some analysts are warning a rate cut is not yet a done deal.
Pound Sterling's economic headache was in danger of morphing into a migraine on Wednesday after official statistics revealed a steep and surprise fall in inflation for the month of December, all but sealing the deal for a now-likely Bank of England (BoE) interest rate cut later this month.
Bank of England MPC member Michael Saunders makes the case for an interest rate cut, and we would expect the Pound to remain under pressure in the current environment, and the short-term downtrend is likely to remain favoured.
The British Pound was trading in the red against the Euro, U.S. Dollar and other major currencies at the start of the new week, with foreign exchange analysts saying the weakness can be linked to building expectations for an imminent Bank of England interest rate cut.