Throughout 2009 so far, Sterling exchange rates have been very volatile, but the general trend is that the pound is slowly strengthening. Against the Euro it’s gained by 15%, and against the US Dollar its risen by 18%. So, very good buying levels compared to where it has been earlier in the year.
Despite this general upwards trend we are still seeing sharp corrections here and there, which is what happened yesterday. The GBPEUR rate dropped almost 3 cents, however has now started to recover and rates climb back up. It’s these spikes up and down that make it difficult to decide when to fix your rate. If you have all the time in the world, then you may wish to gamble on the continuation of the upwards move. If however you need to purchase in the next 3 months and either buy or sell currency, then the volatility could cost you. Yesterdays report looks at some of the options available to you.
Let’s have a look at yesterday’s movements:
Sterling edged lower against the dollar and fell more sharply versus the euro on Tuesday due to risk appetite. There is some uncertainty about the nature of recovery in the UK economy, so we are seeing some near-term headwinds for sterling.
The pound is still attractive over the medium-term as sentiment and economic data improves though.
Bank of England chief economist Spencer Dale said it was still too soon to judge the effectiveness of the central bank’s quantitative easing programme but early signs are positive. The BoE has purchased a little over 96 billion pounds of assets under its programme and is scheduled to complete it 125 billion pound target by the end of July. The jury is still out on whether it will raise its QE target as the economy remains fragile despite a recent pick-up in the data. This again is hindering the pounds rise.
Mortgage lending also had an impact yesterday. It was still extremely subdued with the total declining to an 8-year low for May. The headline BBA mortgage approvals data was firmer than expected at a 13-month high which offered some prospects of recovery.
The only data of note from the UK today is the CBI trade survey. This is an indicator of short-term trends in the UK retail and wholesale distribution sector. This survey tends to have an impact on the formulation of economic policy at the Bank of England and within Government, and so can impact the pound, although usually it’s quite minor.
Some Current Account data, and that’s about it!
Quite a bit here from the states today. We have Durable Goods Orders, New Homes Sales, and most importantly, the Fed Interest Rate decision at 19:15pm. I expect rates to be left on hold again, at a very low 0.25%. Be aware of this US data however, as outlined earlier in the week percieved risk can drive funds towards the USD and weaken the pound.
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