Euro and US Dollar Exchange Rates

Good Morning. The pound remained fairly range bound against the Euro yesterday, still under €1.10. Sterling gained against the US Dollar however on weaker than expected US data. Rates this morning are as follows:

  • GBP/EUR 1.0924
  • GBP/USD 1.6372
  • GBP/AUD 1.7659
  • GBP/NZD 2.1718
  • GBP/CAD 1.6848
  • GBP/CHF 1.6536
  • GBP/ZAR 11.995
  • GBP/JPY 147.60

Last Weeks Trading
The pound rallied against the euro on Thursday amid increased optimism from the Bank of England. The currency closed up more than two points against the euro at €1.0889 a three week high. To give some perspective as to the strength of this rally, the pound set its biggest one day advance against the euro in eight months.

The rise was partly explained by comments made by Paul Fisher, a member of the Bank of England’s Monetary Policy Committee, who said there were positive signs that the MPC’s £175bn Quantitative Easing (QE) programme was working. However, Monday morning brought a new twist to the Bank of England Quantitative Easing (QE) debate in the form of Adam Posen another member of the Bank of England’s Monetary Policy Committee commenting that the central bank should “continue its quantitative easing programme because the financial system has yet to fully recover”. These diverse opinions have only helped fuel volatility and increase a need for definitive answers.

The upcoming event risks that have the potential to produce a meaningful change in the underlying trend of the British pound are the Bank of England’s Minutes on Wednesday 21st October which would provide further insight into the MPC’s overall thinking of this month’s policy meeting, a dovish tone would mean further pressure on the pound and could undo last weeks gains. Friday 23rd October brings the third quarter gross domestic product data, Should the 3rd Quarter reading report growth, it would be a major step towards seeing a more meaningful recovery for the pound.

Last week The Euro hit a 6 1/2-month high of 94.13 pence per Euro. On Monday however it headed toward 91.65 pence per Euro as Finance ministers from the 16 countries that use the euro were due to gather in Luxembourg on Monday amid concern in the region that a strong currency could curb exports and hinder an economic recovery, this comes on top of the European Central Bank president Jean-Claude Trichet’s warning that excess exchange-rate volatility is an “enemy” of stability.

The events to look out for this coming week will be the German IFO business confidence data and Industrial New Orders report both released Friday 23rd October, a positive sentiment in business confidence will have bullish movement in the Euro as too would growth in industrial orders.

To summarise there is still a vast amount of uncertainty and volatility between the Pound and Euro, however, buyers and sellers of both currencies are still able to benefit by utilising several tools of the market. To find out what options are available to you and your circumstance please do not hesitate to contact your Foremost Currency Group broker to discuss your requirements and the benefits associated with them.

US Dollar
The USD was the weakest of the major currencies last week with exception for the Japanese Yen. Flows into the US Dollar were curbed by improving risk appetite as the Dow Jones index rose above the 10,000 level for the first time since October 2008.

The US economic data was mixed. The latest monthly data showed a rise in manufacturing and industrial activity, a fall in jobless claims to a ten-month low, whilst retail sales dropped by a less than feared 1.5%. However, the minutes of the Federal Reserve’s recent policy meeting revealed that it remains especially wary of how the economy would perform if government stimulus were to be withdrawn, dampening speculation that it might end Quantitative Easing measures.

The GBP/USD rate closed up 3.27% at 1.6360, from 1.5700 a week earlier, benefiting those converting Sterling into US Dollars.

Evidence of a hopeful housing recovery will be in focus this week, with housing construction starts and existing home sales. With several major US companies also reporting results this week, investors’ risk appetite levels are also likely to be an important influence on US Dollar direction.

What this means to you
With signs of further USD weakness due to the speculation of printing more money (Quantitative easing) showing a weakness within the US economy, this may provide Sterling with buoyancy to push back through the 1.70 barrier benefiting those buying US Dollars in the coming weeks. However on the flip side the BoE minutes will be released on Wednesday providing crucial information to whether more quantitative easing was favoured by some panel members or even a further rate drop.

If this is the case expect to see the pound lose value across the board especially with the Greenback and the Euro. If you are worried about the current market movements you need not to worry. Here at FCG we provide a number of contracts which could protect your requirement whether one is buying or selling.

One of the contracts we use is a ‘Forward contract’ this allows one to purchase a currency for up to 2 years in advance with only a 10% deposit safeguarding your currency against market movements.

I meant to mention this yesterday… Congratulations to Jenson Button on clinching the Formula 1 World Drivers Championship on Sunday, with an epic sublime drive. Also well done to the Brawn team for clinching the constructors championship. Motorsport is a big success story for the UK, it generating Billions of pounds of income to the UK. And for those that watched the race – what about that Kobayashi?!

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