Daily Currency Update

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Sterling toing and froing begins

GBP - British Pound

Yesterday the pound began what many analysts think could be its natural path over the next few months as it seesaws around 1.30 against the US dollar. A poll among market strategists from Reuters forecasts the pound to pick up almost 4% by the end of the year with hopes that a trade deal can be struck between the EU and UK. In the interim months though, or until at least until investors begin to get nervous, sterling will swing as a result of the trickle of UK economic data. This was the case yesterday with the latest release of UK construction data which showed a slight improvement from December to January as a result of the general election survey. Next on the cards, a final wrap up of UK services data.

Key Movers

Judging by the market reaction it would appear that concerns around the coronavirus have eased particularly with equity markets in China finishing higher yesterday without the assistance of Chinese authorities to provide liquidity and limit short positions. In terms of currencies the Aussie dollar has bounced back somewhat given the decision by the RBA to keep interest rates on hold and this has also buoyed the New Zealand dollar as well.

Importantly however, even though risk sentiment may have increased slightly there is still a future risk when the figures for the economic impact of the coronavirus become apparent. This may not be until the end of February/start of March and even then the full weight of the slowdown may not be revealed. As it stands the Australian dollar is trading on thin ice.

Expected Ranges

GBP/USD: 1.2940 - 1.3140 ▲

GBP/EUR: 1.1720 - 1.1900 ▲

GBP/AUD: 1.9250 - 1.9500 ▼

GBP/CAD: 1.7240 - 1.7320 ▼

GBP/NZD: 2.0000 - 2.0150 ▼