It appears to be a great time to buy property in the US for those with Sterling in their pockets as its recovers much of the previous week’s losses against the US Dollar. Moneycorp currency specialists report that at the beginning of this week it found a burst of new support and Sterling was trading above $1.98 when London opened for the week.
The Dollar got off to a slow start. There were no US economic data to provide direction on Monday or Tuesday. Even when a strong and potentially helpful Retail Sales figure came out on Wednesday investors it failed to inspire investors. The previous week’s bond feeding frenzy had taken the US Dollar as far as investor support would bear and the market was more inclined to look for the negative news that would justify a reversal. Investors had to wait until Friday, when the Consumer Price Index showed core inflation – CPI excluding food and fuel prices – rising at the slowest pace for more than a year. CPI is not the main datum that the Federal Reserve uses to measure inflation but softness suited the mood of the market and Friday’s sellers seemed to be renewing their efforts this Monday morning.
The British economy was unable to produce any astonishingly strong figures but none was bad enough to alter expectations of higher Sterling interest rates in the next month or three. Tuesday’s Consumer Price Index confirmed the expected slowdown in inflation and Average Earnings on Wednesday were also slower than the previous month. But Retail Sales the following day were robust enough to offset the lower inflation number and Sterling survived to fight another day. Its main problem lay in investors’ reluctance to buy into Sterling/Euro when it popped above the two cent band that has held it for more than three months. The market seems to be comfortable with an exchange rate between EUR 1.46 – 1.48 but above that level everyone takes a pace back to think more carefully about the situation.
Inflation in both the United States and the United Kingdom has moderated. For the States it has all but killed any expectation of higher Dollar interest rates. The same cannot be said of Sterling. Buyers of the Dollar can expect cheaper levels in the future.
