Pound Outlook November 2009

Sterling was steady against the US Dollar and Euro on Friday, generally consolidating its recovery this week after data showed another rise in UK house prices this month and improving consumer confidence. However, with poor news expected from the BoE this week, these gains could be short lived, and have infact already started to fall. At 08:30am this morning rates are as follows:

  • GBP/EUR 1.1085
  • GBP/USD 1.6377
  • GBP/AUD 1.8044
  • GBP/NZD 2.2652
  • GBP/CHF 1.6728
  • GBP/CAD 1.7680
  • GBP/ZAR 12.849
  • GBP/JPY 147.64
  • EUR/USD 1.4771

The pound’s rebound from a steep decline triggered by the surprise fall in 3rd quarter UK output announced a week ago has been strong. It is on track for its biggest weekly rise against the euro in nine months. Also, Figures from the Nationwide Building Society on Friday showed that British house prices rose for a sixth month running in October to register their first annual gain since early 2008.

The pound’s bounce this week, also underpinned by solid U.S. growth figures on Thursday, has lifted trade-weighted sterling to its highest in six weeks, as sentiment toward currencies more closely correlated with global growth and rising asset markets has recovered.

But given the extent of the pound’s rebound this week and lack of any major UK economic data or event on Friday, some analysts say the pound may give back some of those gains as attention turns to the Bank of England’s policy on Thursday.

We will look to whether the MPC will expand its quantitative easing programme. Given the surprise third-quarter UK GDP contraction, speculation has grown the BoE may expand its 175 billion pound asset-buying programme. Quantitative easing, under which the central bank floods the market with cash, has stung sterling in past months.

If it’s increased, expect the pound to take a nose dive.

This Weeks Data
We have interest rate decisions for both Australia the UK and the EU.

The Euro’s prospects are likely to be driven by any comments about its strength from European Central Bank President Jean-Claude Trichet following the interest-rate meeting. The BoE is expected to increase its current stance on asset purchases, and inject further funds into the economy, and also keep interest rates at a record low.

The European Central Bank expected to keep rates on hold but may make further talk on exiting its loose monetary policy. This could cause further Sterling weakness, so contact your account executive early to discuss the possibilities of locking in current rates before the market prices in these future movements.

Wednesday also sees various measures of the economy and inflation for the UK, while Friday sees US non Farm Payrolls. 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 often affects the value of USD.

Monday
Ger – Purchasing Managers Index
EU – Purchasing Managers Index
UK – Purchasing Managers Index
US – Home Sales

Tuesday
Aus – Interest Rate Decision
UK – PMI Construction
US – Factory Orders
US – Consumer Confidence

Wednesday
UK – Nationwide Consumer Confidence
Aus – Retail Sales
Ger – Purchasing Managers Index
EU – Purchasing Managers Index
UK – Purchasing Managers Index
UK – BRC Shop Price Index
US – Fed Interest Rate Decision
US – Unemployment
NZ – Unemployment

Thursday
Aus – Trade Balance
Swi – Consumer Price Index
UK – Industrial and Manufacturing Production
EU – Retail Sales
EU – Interest Rate Decision
UK – Interest Rate Decision

Friday
US – Non Farm Payrolls

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