Pound remains weak over fears of more Quantitative Easing

Good Morning. Sterling held steady this morning, after dipping to 2 month lows against the US dollar late last week. Pound Euro rates are still better than of late, due to weakness in the Eurozone. The pound remains under pressure however due to a spate of weak UK economic data and a broadly firmer dollar. Rates at 11am Monday 21st December are as follows:

  • GBP/EUR 1.1240
  • GBP/USD 1.6120
  • GBP/AUD 1.8223
  • GBP/NZD 2.2745
  • GBP/CAD 1.7134
  • GBP/CHF 1.6799
  • GBP/ZAR 12.292
  • GBP/JPY 145.72
  • GBP/NOK 9.4212
  • EUR/USD 1.4337

Pound to US Dollar & Euro
Rates have dropped due to a weak pound, and better than expect data from the US cause strength in the dollar. Against the Euro, fears over the EU banking sector and the downgrading of some EU countries credit rating have weakened the single currency. The pound remains weak, but the Euro is weaker, cause rates to climb last week.

Markets will watch for any further news of Quantitative Easing from the Bank of England, as this will likely be the main driver for Sterling Exchange rates into 2010. The wide expectation is that any further expansion of QE would most likely happen in February.

A series of surprisingly disappointing data releases recently for the UK has reinvigorated market expectations that we may see something sooner. Such a fear will likely keep sterling on the backfoot unless the data can begin to improve.

This Weeks Data
This week is a fairly quiet one for data releases, in the run up to the Christmas break. For the UK, the main news to watch for is Gross Domestic Product (GDP) on Tuesday, and the Bank of England minutes on Wednesday.

GDP is a measure of the total value of all goods and services produced by the UK. The GDP is considered as a broad measure of the UK economic activity and health, and so can have a big impact on Sterlings Value. We expect the figures to show a monthly decline of -0.1% and an annual decline of -4.9%. Any difference will likely affect the pound.

The Bank of England minutes are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. Watch for any mention of further Quantitative Easing, which is one of the main things that have kept Sterling weak this year.

Elsewhere, we also have GDP for New Zealand and Canada. In the US there are some jobless figures, along with a measure of consumer confidence.

It’s also important to remember that trading volumes will be much thinner this week than usual, and so data releases can have a bigger effect on the currency markets than usual.

Monday
Can – Retail Sales
Jap – Bank of Japan Economic Survey

Tuesday
Ger – Consumer Confidence
UK – Gross Domestic Product
UK – Home Sales
NZ – Gross Domestic Product

Wednesday
UK – Bank of England Minutes
UK – Mortgage Approvals
EU – Industrial Orders
Can – Gross Domestic Product
US – New Home Sales
US – Consumer Sentiment
Jap – Bank of Japan Minutes

Thursday
US – Jobless Claims
Jap – Jobless Rate

Friday
Christmas Day, Markets Closed

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