Sterling Exchange Rate Forecast October 2009

Good Morning, and welcome to a new week. Today we’ll have a quick look at where rates are, and then have a detailed look at what the week may hold for the pound and Sterling Exchange Rates. Pound rates are as follows @ 08:30am 5th October 2009:

  • GBP/EUR 1.0895
  • GBP/USD 1.5938
  • GBP/AUD 1.8246
  • GBP/NZD 2.2153
  • GBP/CAD 1.7161
  • GBP/CHF 1.6466
  • GBP/ZAR 12.160
  • GBP/JPY 143.12

Pound rates this morning
The pound fell slightly this morning on expectations monetary policy in Britain would remain loose for longer than in other countries as the euro zone and UK central banks meet to decide policy this week.

Sterling earlier rose against the dollar as the absence of any new commitment on currencies from the Group of Seven countries over the weekend gave traders a green light to sell the U.S. currency. A weaker US Dollar often benefits riskier currencies such as the pound.

Going forward, the BoE is expected to maintain the pace of its asset purchases and keep interest rates at a record low when it ends a policy meeting on Thursday. Analysts expect the central bank to wait until its next set of growth and inflation forecasts in November before making any alteration to monetary policy. However, there is of course the chance that the Quantitative Easing measures may be increased, which would hit the pound hard.

The bank of englands dovish stance has as of late contrasted with that of other central banks, and it is this that is making the pound much weaker than the other major currencies like US Dollar and Euro.

The European Central Bank also meets to decide policy on Thursday. It is expected to keep rates on hold but may make further talk on exiting its extremely easy monetary policy. If they do, then markets will likely treat this as positive for the Euro, making the currency strengthen and become more expensive to purchase.

Pressure on Sterling has been exacerbated since BoE Governor Mervyn King said last month sterling’s fall against major currencies was helping a much needed rebalancing of the British economy towards exports (which as I said at the time, is very odd as we are a nation of exporters, and dont really manufacure and export that much these days)

So, the Euro may well strengthen this week, and the pound remains weak and could well fall further if the BoE continue to pump money into the economy that doesnt exist. It’s going to be an interesting week, but the pound will struggle to recover, and will most likely continue its downward trend. For this reason, if you have an imminent requirement to purchase a foreign currency with Sterling, then open an account with us today for free to benefit from the commercial exchange rates we offer. You may wish to consider locking in a rate before the announcements by the Bank of England, to protect you against any continued fall in the rate.

This Weeks Data
For the UK we have some house price data and various inflationary measures, however the most important data release is the interest rate decision by the Bank of England. They will also announce any further expansion of the recent Quantitative Easing methods. We expect rates to be left on hold at 0.5%, however there if there is any expansion of the QE programme, the pound will likely weaken and exchange rates may fall. We also have a Gross Domestic Product Estimate. This is a report that comes out a month before the official announce. The report is highly reliable and would influence the UK monetary policy, and thus has an impact on the value of the pound.

For the EU we also have an interest rate decision, where rates are expected to be left on hold at 1%. It is likely in coming months that this may rise, which would strengthen the Euro making it more expensive to purchase. Also for the EU there are some inflationary measures, Gross Domestic Product, and a speech by the ECB president Trichet. 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. ]

For the US there is some information on consumer confidence, several different measures of unemployment, and a speech by the Fed chairman where gives a press conference as to how the Fed observes the current US economy and the value of USD. His comments may determine a short-term positive or negative trend.

Elsewhere, we have an interest rate decision from Australia. Again, rates will likely be left on hold. We also have various commodity price measures from Australia and New Zealand. As commodities have a big effect on the value of these currencies, expect some volatility here.

Monday
Aus – Commodity Prices
Ger – Purchasing Managers Index
EU – Purchasing Managers Index
EU – Investor Confidence
EU – Retail Sales
UK – Purchasing Managers Index

Tuesday

Aus – Interest Rate Decision
UK – Industrial Production
UK – Manufacturing Production
US – Consumer Confidence
UK – Nationwide Consumer Confidence
UK – GDP Estimate

Wednesday

Swi – Unemployment
EU – Gross Domestic Product
UK – BRC Shop Price Index
Ger – Factory Orders
US – Budget Statement


Thursday
Aus – Employment & Unemployment
Ger – Industrial Production
UK – Interest Rate Decision
EU – Interest Rate Decision
US – Jobless Claims

Friday
Ger – Consumer Price Index
UK – Halifax House Prices
UK – Producer Price Index
UK – Trade Balance
EU – ECN Trichet Speech
Can – Unemployment


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