Pound Sterling fell against the dollar Thursday after data showed a weaker than expected UK service PMI, which adversely affected the traders’ confidence. Sharp rise in the counterpart also added pressure on the cable.

 

Dollar rose against the major currencies yesterday as payroll data suggested the job market was not as bad as many investors had feared. According to the Labor Department June payrolls fell 62,000. The fall in payrolls in June marked the sixth straight month of declines and the longest losing streak for the labor market since 2002

 

On Wednesday also sterling had declined against the dollar on a slump in UK housing stocks, as confidence in the sector took a further knock after Taylor Wimpey failed to complete capital raising. Taylor Wimpey was down 49 percent and Barratt Developments fell 29 percent and Persimmon fell 22 percent as gloom on the housing sector thickened in the wake of the negative news from Taylor Wimpey. 

 

But on Tuesday, for first time in over two months, cable hit the $2 mark on expectations that inflationary pressures may check the Bank of England from cutting rates even as the economy slows.

 

Sterling had been continuing its up trend till Tuesday against the greenback after the US Federal Reserve failed to give hints on when it would start raising interest rates.

 

Last week the Federal Reserve decided to hold its key interest rate steady at 2.0 percent.

 

The Fed’s statement raised concerns about inflation. It also said price pressures are expected to moderate this year, which pared back expectations for aggressive rate hikes this year.

 

Rising inflation and weakening economy is making a solution difficult. The recent data from various sectors in the UK have given mixed hints regarding the economy.  

 

According to retail sales data released on Friday by the Office for National Statistics, British retail sales volume surged 3.5 percent last month, the fastest pace since the series began in 1986. The sales volume on annual basis was up 8.1%. The figures were much stronger than the forecast for a monthly fall of 0.1 percent and an annual rise of 4.1 percent.

 

But minutes from the Bank of England's last policy meeting showed an 8-to-1 vote in favour of leaving interest rates on hold. According to the minutes some members considered hiking rates in line with the expectation of the market while one of them argued for a cut, but the members finally voted to keep borrowing costs at 5 percent.

 

In the last meeting also, Bank of England's Monetary Policy Committee had decided to leave interest rates unchanged at 5%.

 

Last day in spot trading, sterling closed at 1.9827 (1.9927) against the dollar, after trading in the range 1.9937– 1.9798.

 

 

Weekly Outlook

Expecting continuation of uptrend above 1.9956. Supports 1.9820, 1.9760, 1.9620; resistances 2.0030, 2.0195

 

Last day DGBP (Sept) traded in the range 198.20– 196.95 and closed at 197.26.

 

COMMODITY	CL.RATE	SUP .2	SUP.1	RES 1	RES 2
DGBP (Sept)	197.26	195.49	196.28	198.40	199.90