This weeks data and the effect on exchange rates

Pound falls last week
Sterling fell to new lows against other major currencies last week on perceptions the UK currency would be allowed to weaken to help the fragile British economy, after Mervyn King said a weak pound would benefit the UK economy due to exports (which is strange, as we import much much more than we export!) Rates 08:30am Monday morning stand at:

  • GBP/EUR 1.0854
  • GBP/USD 1.5866
  • GBP/AUD 1.8388
  • GBP/NZD 2.2222
  • GBP/CAD 1.7415
  • GBP/JPY 142.10
  • GBP/ZAR 11.815

Market players took the opportunity to dump the pound, and selling of Sterling accelerated after the pound broke through key technical levels, keeping it vulnerable to further declines.

Bearish sentiment on sterling has persisted since Bank of England Governor Mervyn King said on Thursday that sterling’s fall against major currencies was helping a much-needed rebalancing of the British economy towards exports.

“The BoE voiced benefits of a weaker pound for rebalancing the economy, which ties in nicely with the G20 which have been calling for a rebalancing of the global economy,” said Ian Stannard, senior currency analyst at BNP Paribas. However, the news will not be welcome for anyone that needs to purchase a foreign currency with Sterling, as rates have tumbled, and the pound remains under pressure. we could well see further declines, as there is lots of data this week from all corners of the globe (see below).

JPY
The Japanese yen has hit an eight-month high against the dollar, denting the share prices of many exporters. The currency reached 88.23 yen per dollar which is the highest since January’s 13-year high of 87.10.

A stronger yen makes Japanese exports less competitive but makes imports more affordable to Japanese consumers. In the past, Japan has stepped into the currency markets to weaken the yen when the government thought its rise was threatening growth in the world’s second largest economy.

The authorities have not intervened since 2005, but some observers had believed finance minister Hirohisa Fujii could step in to halt the yen’s strengthening.

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This Weeks Data
We have a very busy week in terms of data releases this week. For the UK, we have Gross Domestic Product which is a measure of the total value of all goods and services produced by the UK. The GDP is considered as a broad measure of the UK economic activity and health, and so is likely to affect Sterlings value. Also for the UK, we have House Price data and various inflationary measures. One other thing to watch is a speech by Alastair Darling and Peter Mandelson, which may also sway the pounds value.

For the EU, we have a speech by Trichet, the president of the European Central Bank. He gives a press conference as to how the ECB observes the current European economy and the value of EUR. His comments may determine a short-term positive or negative trend. Also for the EU we have some confidence measures, and unemployment data for Germany and the EU.

For the US we have confidence data, Gross Domestic Product, and on Friday there is the Non Farm Payrolls data. The report presents the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be excessively volatile, and so very hard to estimate. For this reason, it often causes big swings in GBP/USD rates.

Data is listed below. For more information on how these releases can affect exchange rates for your particular requirement, contact us today.

Monday
EU – ECB Speech by Trichet
NZ – Building Permits
Jap – Consumer Price Index

Tuesday
NZ – Money Supply
Ger – Import Prices
UK – Consumer Credit
UK – Gross Domestic Product
UK – Mortgage Approvals
UK – CBI Trade Survey
UK – Consumer Confidence
EU – Consumer Confidence
EU – Economic Confidence
EU – Industrial Confidence
US – Consumer Confidence

Wednesday
Aus – Retail Sales
Aus – Building Permits
NZ – Business Confidence
Ger – Retail Sales
Ger – Unemployment
EU – Consumer Price Index
Can – Gross Domestic Product
US – Gross Domestic Product

Thursday
Ger – Purchasing Managers Index
UK – Halifax House Prices
UK – Purchasing Managers Index
EU – Purchasing Managers Index
EU – Unemployment
US – Jobless Claims

Friday
US – Non Farm Payrolls

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