Sterling pushes higher, but may not last

Sterling July 2009
The pound has pushed much higher this morning following corporate earnings data yesterday, and better than expected house price information for the UK early this morning. As you can see from the snapshot below of rates at 08:30am, we have significantly better levels than yesterday:

GBPEUR 1.1710
GBPUSD 1.6467
GBPNZD 2.5220
GBPAUD 2.0041
GBPCAD 1.7877
GBPCHF 1.7901
GBPZAR 12.892
GBPJPY 156.15

House Prices
The UK’s largest building society believes there is a reasonable chance that house prices could end the year higher than they started 2009.

Such an outcome was unthinkable a few months ago, the Nationwide’s chief economist said.
The Nationwide’s latest house price survey showed prices rose by 1.3% in July compared with the previous month. The result was alot better than anaylsts predictions, meaning it has helped push the pound through 1.17 against the Euro.

Eurozone
Another reason for the rise is German consumer prices – they fell for the first time in 22 years in July, official figures have shown yesterday. Prices fell 0.6% in July from a year earlier – the first fall since March 1987, when they declined by 0.3%.

The decline was largely due to falls in energy prices, which peaked in summer 2008, and analysts said Germany was unlikely to see a deflationary spiral.

As Germany is the largest economy in the EU, these negative figures have weakened the Euro, and combined with Sterling strength has given an opportunity to Euro buyers to buy at very close to the highest rates all year.

Will it last?
Hard to tell. Most eyes now will be on any further comments by the Bank of England next week. If there is any further news of more Quantitative Easing which many are predicting, then expect a weaker pound.

So, for Euro buyers, consider taking advantage of a Forward Contract to fix these rates now while they are here. You only have to pay a 10% deposit, and you can then draw the funds up to 2 years into the future.

For Euro Sellers that need to convert funds back to Sterling, then it’s also important to note the medium term forecast for the pound. This says that things will continue to go up in the medium to long term, and so again a Forward contract will allow you to remove any risk of rates going the wrong way.

Get in touch today to discuss how we can help you achieve the best possible exchange rate for your transfer.

Today’s Data
We have already had Nationwide House Prices for the UK, which were much better than expected, helping push the pound higher against Euro and US Dollar. Later on we have the GFK Consumer Confidence at midnight tonight. It is a leading index that measures the level of consumer confidence in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn.

Just before 9am we have unemployment data from Germany. Consumer Confidence for the EU comes a bit later this morning.

From the US we have core personal consumption, Employment Cost, Gross Domestic Product and the Chigao Purchasing Managers Index.

This US Data will be very important due to risk sentiment. If figures are good, then it can help boost the pound which is seen as a high risk currency, and in bouyant times it increases demand, so watch this data closely.

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