Currency Forecast 23rd November 2009

Good Morning, and welcome to a new week in the currency markets. Sterling fell sharply on Friday, falling more than 1% to a 2 week low against the dollar, on concerns over the UK’s fiscal health and waning investor appetite for perceived risky currencies. The debt levels were the main news of last week, and caused the pound to fall. At 09:00am Monday 23rd November, rates are as follows:

  • GBP/EUR 1.1070
  • GBP/USD 1.6584
  • GBP/CAD 1.7591
  • GBP/AUD 1.7970
  • GBP/NZD 2.2665
  • GBP/JPY 147.46
  • GBP/CHF 1.6723
  • GBP/ZAR 12.405
  • GBP/NOK 9.2668
  • EUR/USD 1.4977

Sterling also fell against the Euro, falling to a 1 week low as it slid further in the wake of data on Thursday showing UK public finances deteriorated almost twice as fast as expected last month.

The UK government faces mounting pressure to spell out how it will curb public borrowing as it prepares to fight an election due by June 2010. In the Queen’s speech, they said it would be halved within 4 years, but didn’t spell out any plan at all on how this would be achieved.

It’s believed that that record debt levels will threaten Britain’s triple-A sovereign debt rating, which would no doubt cause further falls for the pound. Concerns about mounting government debt and the belief that interest rates will stay very low for many months to come have ensured sterling has remained weak throughout this year, and this is unlikely to change.

“The pressure on sterling will not abate. The Bank of England is in no rush to change its very loose monetary policy and sterling should stay weak against the euro,” Bank of New York Mellon currency strategist Neil Mellor said.

Below is a full breakdown of the weeks data, and what will be the main drivers for exchange rate movements this week.

This Weeks Data
The main data this week is Gross Domestic Product (GDP) data for the UK, Germany and the USA. This is a measure of the total value of all goods and services produced by the various economnic zones. The GDP is considered as a broad measure of the UK economic activity and health. A rising trend has a positive effect on the GBP, while a falling trend is seen as negative.

The UK’s release is on Wednesday, and we expect the figures to show an annual decline of -5.2% and a monthly decline of -0.4%. This will confirm tthat the UK is the only major economy still in recession, and so will likely be negative for the pound.

For the EU, Germany’s GDP will be important as it is the EU’s largest economy, and so Germany’s performance can have a big impact on the value of the Euro.

For the US there’s also a lot to watch out for. On Tuesday we see GDP, Consumer Confidence, and also the FOMC minutes. FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes give a good idea where interest rates will go in the states.

Ger – Purchasing Managers Index
EU – Purchasing Managers Index
EU – ECB Speech
Can – Retail Sales
US – Home Sales

Ger – Gross Domestic Product
UK – Mortgage Approvals
UK – Business Investment
EU – Industrial Orders
US – Gross Domestic Product
US – Consumer Confidence
US – FOMC Minutes

Ger – Consumer Price Index
UK – Gross Domestic Product
US – Jobless Claims
US – Homes Sales

Ger – Consumer Price Index
UK – Distributive Trade Survey

EU – Business Climate Indicator
EU – Consumer Confidence
EU – Economic Confidence

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