US Dollar strengthens vs. GBP after Fed decision

The pound weakened by 0.48 cents (0.29%) against the US dollar yesterday, finishing the day at $1.6404.

• In early trading yesterday sterling rose against the greenback, as the US currency came under broad selling pressure in the build-up to the US Fed interest rate decision later that day. Investors were convinced the Fed would quell recent speculation of a possible interest rate rise later this year, a move which analysts believe would sting the dollar.
  
• Sterling’s rise was little affected by CBI realised sales data out mid-morning, which revealed UK retail sales fell at the same pace as the previous month.
  
• However, dovish comments from Bank of England Governor Mervyn King capped sterling’s gains in late trading after he said he had genuine concern about how quickly the UK economy would pick-up from the recession.
  
• Finally, the Fed’s decision to leave interest rates on hold and not extend its quantitative easing program because of a slowing in the pace of economic contraction was taken positively by investors, who bought into the greenback as a result.
  
• In trading so far today the pound has risen against the dollar as investors continue to pick over yesterday’s announcements.
  
• There are no major announcements due in the UK today, whilst in the US there are three notable economic releases: Unemployment Claims and annualised first-quarter GDP data is out at 13.30 BST, whilst at 15.00 BST Fed Chairman Ben Bernanke is due to testify in front of a House committee.