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Pound Sterling holding steady in quiet session

Published: 30 Dec at 1 PM Tags: Pound Sterling, Euro Exchange Rate, Dollar Exchange Rate, Australian Dollar Exchange Rate, Currency Exchange, Forex, Euro Crisis, UK, Economy,

The Pound is on course to make a second consecutive year of gains against the US Dollar and is holding at a two-year high after data showed that UK house prices climbed for an 11th consecutive month in December.

Due to thin trading volumes as a result of many traders closing their books ahead of the end of the year liquidity in the markets was limited. The lack of activity in the market meant that volatility has been increased and led to exaggerated market movements.

Risk-related currencies strengthened after European Central Bank Governing Council member Jens Weidmann on Friday said keeping interest rates low may endanger political reforms.

Against the Australian Dollar the Pound is likely to push higher as Australia’s exports of iron ore were affected by the shutdown of the world’s largest iron ore terminal. An approaching cyclone has forced the halt of shipping and activity in the Australian northwest and output has received a knock.

Adding to the Pounds continuing strength is the increasing speculation that the Bank of England will raise interest rates sooner than it initially estimated as the UK economy continues to gain in strength.

Next year looks likely to begin strongly for the Pound.

“We expect the Pound to retain its strength, especially against the Dollar, into 2014,” said Eimear Daly, head of market analysis at Monex Europe Ltd. “The pace of the recovery and market speculation about the Bank of England’s interest-rate outlook will continue to underpin the currency.”

If Sterling continues to rise in strength then there is a likelihood that the BoE will call for the currency to weaken in a bid to offset the potential impacts on UK exports.
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