Currency - GBP / US Dollar

The overall downward trend in the Sterling - US Dollar exchange rate is clear but we are seeing some Sterling buying interest - or more likely USD profit taking - at the October low of 1.53. Sterling bounced off this rate today and may well find a bit of buying interest from here. There is every reason for the US Dollar to be strong though; positive employment data, improving manufacturing and industrial data, growing business and consumer confidence. However, the US housing market is still dire and that is a drag on the US Dollar. Sterling, on the other hand, is being battered due to our close trading links with Europe and uncertainty over how well the UK economy is really doing. There are constant reports suggesting the UK economy barely grew in the 4th quarter of 2011 and until we see anything to suggest this is not the case, the Pound will continue to find it tough. Many analysts are pointing to $1.50 as an obvious psychological target although there are no particular technical reasons why that should happen. If we do manage to stay above $1.52, then a bounce to $1.56 is perfectly possible in the short term.