Good Morning. Sterling rose yesterday, boosted against USD after a weak reading of U.S. employment kept the USD under pressure.
The pound was supported versus the dollar, but gains were capped and sterling was unable to push higher against the euro as investors remain wary of the UK’s mounting debt burden and weak economy, along with concerns about political uncertainty. Rates have started to fall this morning however.
Today we’ll have a look at the rates for pound to Euro. Rates @ 08:30am are as follows:
- GBP/EUR 1.1087
- GBP/USD 1.6092
- GBP/AUD 1.7324
- GBP/NZD 2.1680
- GBP/CAD 1.6607
- GBP/CHF 1.6372
- GBP/ZAR 11.848
- GBP/JPY 147.84
- GBP/NOK 9.0421
- EUR/USD 1.4507
GBP/EUR trading began last Monday at the 1.125 level after strong readings for the UK manufacturing sector and mortgage approvals increased fuelling optimism that the British economy is improving.
The manufacturing purchasing manager’s index on Monday came in up for December, higher than November and exceeding forecasts. This shows that UK manufacturing activity expanded at its fastest in more than two years. Other data showed that British lenders in November approved the highest number of home mortgages since March 2008.
However, by Tuesday rates began to fall towards the 1.11 level, but it was not the economic data that shaped sterling’s performance, it was politics.
News of an attempt to oust Prime Minister Brown sent the pound lower only for it to rebound as quickly as it fell once news filtered through that the plot had failed. This perfectly illustrates the volatility of the markets and the bonuses of being able to lock in to an exchange rate for up to two years in advance through the use of a forward contract.
This week saw few economic data releases within the Euro zone; however the Euro continued to struggle after the recent downgrading for both Spain and Greece’s credit rating. Further to this, unemployment increased by 10%, to it’s highest level in 12 years and retail sales fell by -1.2%.
Looking forward to next week we have the UK GDP estimate. If the Estimates are seen as ‘Bullish’ this will potentially move Sterling up however if the estimate is seen as ‘Bearish’ we could see Sterling lose ground against the single currency.
Furthermore we have the first European Central Bank meeting which is unlikely to feature any official change, but is likely to include Jean Claude Trichet’s opinions of what lies ahead. With such an uncertain week ahead it may be worth enquiring with your Account Manager limit orders to take advantage of any possible peaks and a stop loss to protect from any major losses.
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