Sterling has a poor day whilst all eyes are on the Fed Chairman’s speech this afternoon

Home » Foreign Currency News » Sterling has a poor day whilst all eyes are on the Fed Chairman's speech this afternoon

Yesterday's UK data was rather disappointing with Nationwide consumer confidence falling to 49 in July from 51 June and CBI reported sales dropping to -14 in August from -5 in July which was the lowest level since May 2010.

The data contributed to a dismal day for Sterling yesterday but it could have been worse if it wasn't for Bank of England monetary policy committee (MPC) member Weale stating that he doesn't believe there is a case for further quantitative easing at the moment. He went on to say the economy is weaker than the MPC would like but the picture is not like summer 2008 however the Bank could do more if there is further weakening of inflation and growth doesn't pick up. He also noted that weak growth in Europe is “cause for concern” as the UK faces financial contagion from Europe and the US.

Elsewhere US initial jobless claims rose to 417,000, up from 412,000 the previous week but had little impact on the US Dollar. Thursday's most intriguing price action came from the Canadian Dollar in response to a one-Dollar increase in the price of oil. When oil prices then fell, the Canadian Dollar lost all of it's gains against the US Dollar however, it managed to hold on to some of its gains, most successfully against Sterling which went from £/CA$ 1.62 to £/CA$ 1.6015. Overall, Sterling was walked all over by more or less every currency on the block yesterday.

Sterling's supporters will be praying that this morning's revision to second quarter economic growth in Britain does not result in a downgrade to the initial estimate of 0.2%. They are probably also secretly hoping that there might be an upward revision although that is probably rather optimistic.

This afternoon the US announce their revision to second quarter GDP growth which is expected to be unchanged at 0.3%. There is also the speech by Federal Reserve Chairman Bernanke in which he will announce a third round of quantitative easing. That is what equity investors are hoping for anyway.

After Mr Bernanke's announcement of QE2 a year ago, the US Dollar steadied for a week or so before moving lower and staying lower. Whichever way the Fed chairman decides to jump, his words are likely to move financial markets.

Have a good weekend.