Weekly Market Comment - 14th May 09

14/05/2009

The pound has spent the last three full days trading above the psychological $1.50 level but has succumbed to selling pressure from both a fundamental and technical perspective.

Despite gaining a foothold above the $1.50 level for more than one day for the first time this year, the proximity of the previous year high at 1.5370 from early January together with another downbeat quarterly inflation report from the Bank of England and a decrease in investor risk appetite has seen sterling lose some of its shine.

Bank of England Governor Mervyn King warned that even if a recovery was to begin soon, its sustainability would be in question. King also noted that inflation would remain well below the 2% target over the next two years and that the full impact of the recently increased quantitative easing program would take six to nine months to become clear.

The pound fell from around $1.53 just ahead of the release to a little below $1.51 in afternoon trade before stabilising.

David Lamb - Head of Treasury Services
 

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