Exchange Rate Forecast Oct, Nov, Dec 2009

Sterlings rise has been shortlived, and the pound fell yesterday, reversing early gains against the Dollar and Euro after a weak reading of U.S. manufacturing activity triggered some safe-haven flows into the U.S. currency. Before we look at rates, here is our latest slot on CNBC, where our Dealing Director talks about the US Dollar. If you can’t view the video, click here to watch it on You Tube.

Rates at 08:30am 1st October are as follows:

  • GBP/EUR 1.0945
  • GBP/USD 1.5978
  • GBP/AUD 1.8093
  • GBP/NZD 2.2089
  • GBP/CHF 1.6606
  • GBP/JPY 143.84
  • GBP/ZAR 12.054

The pound initially climbed 1 % against the US Dollar, boosted by data showing a jump in UK consumer sentiment and signals from the previous day that the Bank of England may not cut its bank reserves deposit rate anytime soon.

Sterling relinquished those gains after a reading of business activity in the USA failed to return to growth in September as expected, raising concerns about the recovery prospects of the U.S. economy, which cut risk demand and weighed on the pound.

While the strong UK data suggested sentiment about the UK economy was improving, analysts said the economy remained weak, and that recent weakness in the pound would continue on the view that UK interest rates will remain low for some time to come.

The pound is likely to remain under pressure, as the Bank of England keep their Quantitative Easing programme in place. Rates will recover, however this is not likely to be until 2010. If you need to purchase currency in the next three months until the end of the year, then consider protecting yourself from the volatile currency markets by fixing your rate on a Forward Contract. Contact us to discuss this. Remember, FCG rates are up to 4% better than the bank offer, and so the savings we can show you are huge.

Why not open an account. It’s free and does not obligate you. It simply means you can get a quote to compare with your bank and see how much you can save!

Global Recovery
The global economy is expanding again and financial conditions have improved significantly, the International Monetary Fund (IMF) has said. But in its latest World Economic Outlook, the IMF said the “pace of recovery is expected to be slow”.

It added that the recovery is likely to be “insufficient to decrease unemployment for quite some time”. On Wednesday, the IMF cut its forecast for the amount that banks are likely to lose in bad loans and investments. This will probably benefit other currencies before Sterling however, due to the levels of debt the government have and the way they are trying to spend their way out of the problem. So don’t expect this news to cause the pound to rocket up.

Eurozone Prices Fall
Prices in the eurozone fell in September at a faster rate than they had in August. The inflation rate fell to -0.3% in the year to September, from -0.2% in the year to August, according to Eurostat.

It is the fourth consecutive month that the rate of inflation has been negative in the bloc of 16 European nations that use the euro as their currency. Oil prices have fallen over the past month as concerns have grown about the state of the US economy. This would usually weaken the Euro and cause rates to rise, but the BoE stance and goverment policy of ‘spend spend spend’ are keeping the pound weak. This is likely to continue.

Todays Data
Today we have House Price Data along with Purchasing Managers Index, which captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in UK.

For the EU, watch for Jobless data, it’s s a leading indicator for the European Economy. If the rate is up, it indicates a lack of expansion within the European lobar market, and so can affect the euros value.

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

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