As geopolitical concerns continue between Russia and Ukraine as well as in Iraq, we’re starting to see the Sterling Pound is getting hammered. Aside from that, the GBP also sees significant pressure after recent data showed that the UK is still trading at a deficit against the rest of the world. Currently (3:17 PM Pacific, 8/10/2014), exchange rates are as follows…
- GBP/EURo – Currently trading at 1.25130 compared to 1.25987 at the close on August 7th.
- GBP/USD – Currently trading at 1.67750 compared to 1.68284 at the close on August 7th.
- GBP/AUD – Currently trading at 1.80845 compared to 1.81655 at the close on August 7th.
As you can see, we can compare the GBP to just about any other currency between the 7th of August and today and see that the currency has faced quite a big hit. So…
What’s causing the Decline in the GBP?
There are 2 major concerns that are prompting investors to sell the GBP. First off, investors are growing more and more concerned with the geopolitical issues in Ukraine and Iraq. After the United States, authorized attacks on ISIS in Iraq, we started to see a sharp drop in the GBP bringing it down to an 8 week low when compared to the US Dollar. The overall consensus is that as a result of the military activity, investors are moving their money to investments that would be more commonly considered safe havens.
However, geopolitical turmoil isn’t the only factor causing the landslide we noticed in the GBP late last week. Another big concern is rearing up around the UK’s trading deficit. New data indicate a wider than expected and continually widening trade deficit in the UK. As a matter of fact, the new data places the UK’s trade deficit of £9.4 billion; up from £9.2 billion.
Will The Sterling Pound Make A Recovery Soon?
If you’re a currency buff like me, you know that currencies rise and fall regularly; it’s a fact! So, when we see drops like this, we can expect at some point for the value of the currency to increase again. However, it becomes difficult to pinpoint when that may happen. In this case, there’s a crucial report coming out on Wednesday that will give us a bit of information with regard to whether or not the GBP will increase anytime soon. That data is the UK jobs report.
In recent reports, the UK has displayed incredibly strong growth in jobs numbers. However, with the geopolitical issues, and poor trade deficit, the UK is going to need the jobs report to be great! If they continue on the track record of providing great numbers, we can expect to see a boost in the GBP; hopefully making up for the losses of last week. However, if the jobs report shows a decline in momentum, it could mean incredibly bad news for the currency; sending it reeling down for yet another landslide type drop. So, if you’re a ForEx options trader, you’re going to want to pay close attention to the report on Wednesday as it could present some great opportunities!