United States Dollar: Once again the dollar advanced against most of the majors on the back of risk selling. In the US, softer than expected data did not dampen demand for the world’s reserve currency, driving the dollar index (a trade weighted basket of currencies) towards 9 month highs above 80.5. In the UK investors fretted about the implications of a hung parliament and GBP/USD saw its biggest one day drop in more than a year. After reaching a high of 1.5204 in early trading yesterday, the pound plummeted to a low of 1.4784 as long positions were squeezed out (triggering further stop loss selling) and speculators jumping on the selling bandwagon. There is talk that the pound could fall further still, and despite positive news from the manufacturing sector, downside risks will weigh heavily on the pound over the next few days, and possibly up until the general election in May. In the press this morning, the predictable comparisons between Greece and the UK are being made with renewed fervor, stirring up what may indeed become a sterling sell-off spiral.
- I expect a range today in the GBP/USD rate of 1.4800 to 1.5000
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