Sterling Euro rates close to 6 month high

Pound Gains
Sterling rose sharply against a broadly weaker dollar and gained versus the euro on Tuesday, helped by further signs the UK housing market is stabilising. The pound was also buoyed by a calmer UK political vista, with Labour Party parliamentarians on Monday offering their support to Prime Minister Gordon Brown.

“Sterling is better bid. It got a boost from housing data falling less than expected and from Gordon Brown gaining some support from MPs,” RBC currency strategist Christian Lawrence said.

Bank of England Deputy Governor Paul Tucker warned on Tuesday, however, that although surveys have pointed to some improvement in the British economy, the medium-term outlook remained “highly uncertain”.

Pound to Euro
Rates here climbed and levelled off just above 1.16 – back almost to the 6 month highs of last week. Partly this was due to the above, partly it was due to weak German data that weakened the Euro and cause rates to rise.

German exports fell 28.7% in April compared with April 2008, according to the Federal Statistics Office.It was the biggest fall since the recession began, suggesting the economy has some way to go before it recovers. But the ministry’s statement stressed that “the downward trend has slowed noticeably”. “The odds that industrial production has hit its lowest point have improved due to stabilising demand,” the statement added. But analysts were not impressed by the trade figures.

It caused a sell off of Euros that weakened the single currency, helping to push rates back above the 1.16.

What next for the pound?
As the last few weeks have demonstrated, rates can climb to a spike and then suddenly drop off. Rates can also recover very quickly as we have seen this week. It’s impossible to predict which way things will go, however rates for the Euro are close to the 6 month highs we saw last week.

Today (see below) we have lots of UK data that could push rates either way. It is times like this where currency tools become very attractive. If you are hoping rates will rise, then you can take that gamble, while at the same time placing a Stop Loss order – this means should rates move the wrong way and plummet, then your currency is automatically secured at a bottom level, minimising any loss to a certain level.

Economic Data for today
Today is the busiest of the week in terms of data releases that may affect exchange rates. Alot of the data is UK based, so expect pound to euro and pound to dollar rates to fluctuate.

So, lets take a detailed look at the UK data today, and how this may affect exchange rates:

  • Industrial Production – measures outputs of the UK factories and mines. Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector.
  • Manufacturing Production – measures the manufacturing output. Manufacturing Production is significant as a short term indicator of the strength of UK manufacturing activity that dominates a large part of total GDP.
  • Trade Balance – a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP.
  • GDP Estimate – The report is highly reliable and would influence the UK monetary policy.

So, estimates will already have been made for the above announcements. If figures are at or close to these estimates, the dont expect much movement. If however the figures are above or below expectations, then that’s when we’ll see rates rise or fall respectively. If you have a requirement to purchase currency with Sterling, then today could be a gamble that you may win or lose. If you would prefer not to leave it to chance, then open an account with us for free by clicking the orange banner below, and talk to us about the tools we have available to protect you against falling rates.

Elsewhere we have US – Trade Balance Data and New Zealand – Interest Rate Decision
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