Pound Euro Rates 10th August 2009

Market Snapshot

  • GBPEUR 1.1716
  • GBPUSD 1.6617
  • GBPAUD 1.9810
  • GBPNZD 2.4700
  • GBPZAR 13.301
  • GBPCHF 1.7995
  • GBPJPY 161.74

Pounds Gains short lived
The pound had a very strong run in the first part of last week, hitting 1 year highs against the US Dollar and close to year highs against the Euro. The gains were due to increased confidence in the UK economy, amid positive data releases showing the UK economy is rising.

The gains were short lived however, as is often the case. As outlined in Fridays Post, the pound plummeted after the Bank of England increased their asset buying programme, and pumped another £50bn into the econonmy.

Sterling fell further on Friday, hitting a one-week low against the dollar in volatile trade due to a broad rise in the U.S. currency following a stronger-than-expected reading of U.S. non-farm payrolls.

The UK currency struggled a day after the Bank of England surprised markets by extending quantitative easing measures to boost the nation’s economy, while poor first-quarter earnings results at Royal Bank of Scotland also stung the pound.

Traders continued to sell the pound after it fell more than two cents against the dollar on Thursday following the BoE announcement, and had all but snuffed out big gains made early this week.

Some analysts said more quantitative easing would hurt sterling, adding that UK interest rates at a record low 0.5 percent for a prolonged time would do no favours to the currency. It would also be haunted by the need for future fiscal tightening to pay for the asset-buying programme, he added.

“Sterling will lose big-time support from the Bank of England’s rate view,” said Hans-Guenter Redeker, chief currency strategist at BNP Paribas in London.

So, this shows that even amid confidence of a revival of the economy, and data releases to the contrary can weaken the currency very quickly indeed. It is for this reason that blindly hoping rates will continue to move in your favour can backfire. Dont leave it to chance, Open a free trading facility, and you can then discuss the various tools we have available such as Forward Contracts, Stop Loss and Limit Orders. Make sure you take control of the markets, and don’t let them take control of you!

This Weeks Data
Economic Data releases have a big impact on foreign exchange rates. Analysts will already have predicted what the results of the data below will be, and investors may well have already moved funds in anticipation of these announcements. If figures come out better or worse than expected, then the currency for the country concerned will generally strengthen or weaken acccordingly.

A good example is the Quantitative Easing measures announced last week by the Bank of England. Most analysts expected no further money would be pumped into the economy, and Sterling was strong as a result. When the announcement came on Thursday that in fact a further £50bn would be created to pump into the economy, the news came as a surprise to the markets. The pound fell straight away and all the gains it made through the week were wiped out as the view of the UK economy deteriorated. So, data releases are very important and can change rates very quickly.

So, what should we look for this week? For the UK, we have some Trade Balance figures on Tuesday, but Wednesday sees a raft of UK releases. Watch for the various measures of unemployment for the UK, as any increase in unemployment will likely weaken Sterling.

For the EU we have Trade Balance data, in addition to the quarterly GDP figures. This will give a measure of the total value of all goods and services produced by the Eurozone. The GDP is considered as a broad measure of the Eurozone economic activity and health. A rising trend has a positive effect on the EUR, while a falling trend is seen as negative.

A full list of data is below, but of course do get in touch to discuss the implications of this on your specific requirement.

Monday
Aus – Home Loans
EU – Investor Confidence
UK – BRC Retail sales
UK – RICS House Price Balance

Tuesday
Jap – BoJ Interest Rate Decision
Aus – NAB Business Confidence
Ger – Consumer Price Index
Ger – Wholesale Price Index
UK – House Price Index
UK – Goods Trade Balance
UK – Total Trade Balance
US – Non-Farm Productivity
US – Consumer Confidence

Wednesday
UK – Average Earnings
UK – Claimant Count
UK – Unemployment Rate
UK – Jobless Claims
UK – BoE Inflation Report
EU – Industrial Production
US – Trade Balance
US – Fed Interest Rate Decision

Thursday
Ger – GDP
EU – GDP
US – Import Prices
US – Jobless Claims
US – Retail Sales

Friday
EU – Consumer Price Index
US – Consumer Price Index
US – Industrial Production

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