Pound outlook for December 2009

Good Morning. As usual for a Monday, we’ll have a quick look at where rates went last week, and a full breakdown of the weeks data that may affect exchange rates. This morning, pound rates are as follows:

  • GBP/EUR 1.1057
  • GBP/USD 1.6217
  • GBP/AUD 1.7806
  • GBP/NZD 2.2369
  • GBP/CAD 1.7216
  • GBP/CHF 1.6722
  • GBP/ZAR 12.120
  • GBP/JPY 143.70
  • GBP/NOK 9.3658
  • EUR/USD 1.4662

Overview of last week.
Last week we saw Greece and Spain have their credit ratings reduced, weakening the Euro and causing GBP/EUR rates to climb. There were fears the UK may face the same problem, but on Friday major ratings agency said Britain’s top-notch sovereign rating was under no immediate threat.

Sterling fell against the dollar, however, as stronger-than-expected U.S. data lent broad support to the U.S. currency, while worries about the UK’s shaky situation continued to weigh on sentiment towards the pound.

The pre budget report gave little real news, and was more like an pre election report. The chancellor said our huge deficit would be halved within 4 years, but declined to give any information on how they plan to do this. With no meaningful steps being taken, investors remain wary about Sterling, and this likely cause exchange rates to stay low.

This Weeks Data
As usual, we’ll list a full breakdown of the most important data releases. A brief breakdown of each economic area is as follows:

For the UK, eyes will be on economic data releases after last weeks political Pre budget report. There was little in the report that outlined how the government plan to repay the huge deficit, other than ‘they will half it’ within 4 years. We have already had house price index this morning, showing that prices declined 2.2% when the predicted drop was only 1.6% causing some weakness in Sterling. later in the week we have Retail Sales (widely considered as a key measure of inflation that indicates an accurate reflection of the cost of living) and unemployment and jobless data. This is also a reflection of the health of the economy as a whole, and can therefore affect Sterlings Value.

In the EU, last week saw Greece and Spain have their credit rating reduced. this weakened the Euro, and cause GBP/EUR rates to climb benefiting those purchasing the single currency. We have employment data and industrial production data this week. This shows the volume of production of Industries such as factories and manufacturing. Up trend is regarded as inflationary which may anticipate interest rates to rise. We expect the figures to show a decline of around 10%.

In the US, we have lots of employment data on Wednesday, along with an interest rate decision. This interest rate affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the exchange rate as a higher rate is more attractive for investors, and causes strength. We expect rates to be left at a record low of 0.00% – 0.25%.

EU – Employment
EU – Industrial Production

AusRBA Minutes
UK – Consumer Price Index
UK – Retail Price Index
UK – House Price Index
EU – Economic Sentiment
US – Producer Price Index
US – Industrial Production

Aus – Gross Domestic Product
UK – Average Earnings
UK – Unemployment
UK – Jobless Claims
EU – Consumer Price Index
US – Building Permits
US – Consumer Price Index
US – Interest Rate Decision

UK – Retail Sales
Can – Consumer Price Index
US – Jobless Claims

Jap – Interest Rate Decision
Ger – Producer Price Index
UK – Money Supply
UK – Business Investment

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