The pound started the week well against the US dollar, strengthening by 0.83 cents to close that day at 1.4895. The pound’s strength came from the announcement of better than expected earnings from Barclays bank who posted pre-tax profits of £6.1 billion for 2008. Improved investor sentiment was also coupled with lingering concerns for the US economy after Friday's poor unemployment data in the US, and investors remained cautious over Obama's fiscal stimulus package.
In today's trading the dollar has strengthened back over the pound, reaching as low as 1.4775 ahead of the announcement by Treasury Secretary Timothy Geithner about the details of a new bailout plan. This will take place at 16.00 GMT, before the announcement of ABC/Washington Post Consumer Confidence figures at 22.00 GMT.
Do you expect sterling to continue to gain strength now, or will the dollar push back down below 1.40?
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The house view here at Caxton is that the pound will continue to remain under considerable pressure against the US dollar, and we would expect the rate to fall back below the 1.40 level again as speculation grows about the possibility of quantitative easing in the UK.
Speculation about the possibility of Lloyds being nationalised will also weigh on the pound, and continued volatility in equity markets should allow the dollar to capitalise on the pound's weakness.
If you have any other questions don't hesitate to let us know.