Forex Forays: British Pound Hits 26 Year High Vs. US Dollar

While I'm not currently trading the GBP, I thought this was an interesting bit of news - on Wednesday, April 18 the British pound hit its highest level versus the dollar since 1981, breaking $2.010 for the first time in 26 years. And here I am looking at daily, weekly and monthly highs and lows - sorta puts your own little trading timeframe in perspective.

The big rise against the dollar followed data out of the Bank of England showing inflation in the UK at 3.1%, which is way above the bank's goal of holding inflation at 2%. Traders are now guessing that the bank will raise interest rates to try and bring the inflation rate down - and with those higher interest rates will come more profitable carry trade opportunities for those buying the GBP. (The pound has long been a key component of most forex carry trading strategies.)

Hence this dramatic spike upward. Hope you GPB/USD traders out there made some pips off it!

Labels: British Pound, Cable, Carry Trading, GBP/USD, Inflation, Interest Rates

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Forex Forays presents one trader's ideas, opinions, successes, failures, strategies, predictions, and other insights gained from first-hand experiences (good, bad, and just confusing) in the global currency markets, with a particular focus on the EUR/USD and GBP/USD currency pairs. All posts in this blog are intended for informational and educational purposes only, and all content on this site is the exclusive copyright of Forex Forays.

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2 Comments:

At 9:49 AM, John Russell said...: I took GBP/USD off my trading list as soon as it broke $2.00. My advice would be to be so careful at these levels, right now both GBP and EUR have a huge stigma going around them "buy it and you can go wrong, the trend is up up up" As an experienced trader, I am sure you know what can happen when everyone is on that train. I made a post about this matter earlier this week, I am not predicting a huge downfall, but I am cautious at these levels. I figure to wait a bit and see what happens. GBP is an automated account cleaner if you forget to bring your caution to the screen :-)
At 9:52 AM, John Russell said...: I made a post about this earlier this week. I have basically put off trading the GBP/USD pair for awhile. These levels are a little suspicious to me and right now the sentiment is buy GBP and EUR, you cant go wrong. As an experienced trader I am sure that you know what usually happens when everyone gets on that train. I am not predicting any kind of price action, just being cautious because I feel that some of these prices are overdone at the moment and that there is potential for surprise. GBP is a good automated account cleaner if you don't come to the screen with caution :-)