FOLLOWING weeks of positive data from the UK economy, the pound dipped late last week against the Euro.
The fall came as a reaction to the International Monetary Fund’s comments stating that Sterling is overvalued by 5-10%.
Sterling is currently under pressure from the US Dollar, which is reacting well to Federal Reserve Chair Janet Yellen’s continued tapering program and job creation.
But to dip suddenly against a struggling euro does seem unwarranted, although it could just be the big city traders taking profits before heading off on their summer holidays.
There were more damaging stories emerging from the ‘The City’ last week.
Possible currency manipulation is being investigated, among claims that are not too dissimilar to previous accusations of Libor – the London Interbank offer rate – fixing, for which big fines have been already issued.
The Foreign Exchange (FX) investigation will look at large banks from the US, Switzerland and the UK colluding on large trades that can influence prices beyond ‘supply and demand’.
Many of the traders involved have already been suspended from their duties while the outcome of their activities are investigated.
Mark Carney, governor of the Bank of England, has been called on to make a full disclosure of the BOE’s influence in the FX rate fixing scandal, as the accusations indicate the BOE turned a blind eye?
I’m sure the story will unfold, but this could bigger than both the PPI and Libor scandals.
This week we have interest rate announcements in both Europe and the UK, and all eyes will be on Mario Draghi.
Can he lower interest rates further to stimulate spending?
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