- The British Pound has shot higher against the US dollar, and that’s not a huge surprise to me after the reaction to the CPI numbers were decidedly negative for the US dollar.
- And when you keep in mind that the British Pound has been one of the better currencies against the dollar.
- So, all of this makes a lot of sense. And I think we are going to revisit the 1.3550 level, possibly even break above 1.36 if the momentum against the US dollar continues.
We’ll just have to wait and see. Either way, I think this is a scenario where you certainly don’t want to short this pair, but I watched this pair quite closely. And the main reason is that if the British Pound struggles against the US dollar, then it’s a sign that the US dollar is strengthening and the US dollar will absolutely pummel most other currencies that aren’t as vigorous as Sterling has been.
Others Might Be Traded on a Drop
Think of the Canadian dollar or perhaps the Japanese yen. So even if you’re not trading in this market, it is a good indicator of US dollar strength as of late. When we sold off back at the end of last year and everybody was buying US dollars, the British pound, even though it did fall, it fell a lot less rapidly than many of its counterparts.
And as we’ve seen the US dollar sell off, the British pound was much quicker to rally than many of its counterparts. So, all things being equal, this is a market that’s worth paying attention to even if you don’t trade it. I continue to watch the Pound against many other currencies as well, as its strength is fairly widely distributed.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.