As dollar maintains strong gains, pound may prove weak under pressure

The US dollar has maintained strong gains against a basket of major currencies today, despite pulling back slightly from a three-month high last week under pressure from a drop in the US 10-year Treasury yield.

The greenback has gained 2.5 per cent from April’s low against a basket of currencies, trading at 91.56, but down from Friday’s high of 91.99, its strongest level since 11 January.

However, Hussein Sayed, chief market strategist at FXTM cautioned that “whether the uptrend resumes this week will depend on inflation data, the Federal Open Market Committee meeting, and the employment report.”

Meanwhile, the pound is still under pressure after the UK’s disappointing GDP growth was announced last week, and may be in for more difficulties after the resignation of UK Home Secretary Amber Rudd.

The pound is trading cautiously at the start of the new week, hovering at around $1.37 after plummeting 1.6 per cent last week and over four per cent since its peak in April of $1.44.

“The mood is dark and further weakness is likely,” said Kit Juckes, global fixed interest strategist at Societe Generale. “We've twisted ourselves into knots with recent short-term gyrations. GBP is cheap and cheap for good reason.”

Jasper Lawler, head of research at London Capital Group, said the future is looking bleak for the British currency: “This week sees little potential for sterling bulls to take back control with no high impacting data due in the European session and just a scattering of PMI readings across the week,” he said.

“A continuation of weaker than forecast UK figures will see traders punish the pound, which could be a little shaky anyway on news of the resignation of the Home Secretary, Amber Rudd.”

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