UK Forex Market is a fundamentally strong foreign exchange market of the United Kingdom. This market is very much dependent upon the economic condition of the country.
The policy matters taken by the government affects the UK Forex Market significantly. If the economy of UK is strong and is going gaga then it is evident that the demand for pounds, domestic currency of UK, around the world would increase. This will make the currency to appreciate. Hence, the health of the UK Forex Market would be good.
It has been observed that on the last day of July in the year 2007, the British pound has appreciated with respect to theUS Dollar. The factor that is playing a very important role to this end is the expectation of the traders of a rise in the repo rate by twenty five basis points. The traders differ in the expectation level of repo rate hike and their general perception is hovering between the rate 5.75 % and 6.25 %.
One of the factor that is pushing up the British pound with respect to US Dollar is rise in the consumption of the domestic consumers. The sales figure of the retail sector in the month of July, 2007 reveals that it rose by a significant percentage of 18 % on a year-on-year basis. This increase has even surpassed the hike in the rate of retail sales in the month of June, 2007 of seventeen percent.
The British pound is going so strong that the exchange rate of it in relation to the Euro is also appreciating. But the knowledgeable traders are becoming a bit cautious about the UK Forex Market due to the expectation that the government is on the move to tighten the economy through the regulation of the monetary policy. Thus, this rally in the UK Forex Market is expected to slow down in the coming days.