GBP/EUR and GBP/USD Forecast Feb 2010

Pound vs Euro
Last week was a relatively stable week for GBP/EUR exchange rates showing little more than a 1% movement between the high and low point of the week for the currency pairing. The slight movements seen in the market came after the Bank of England’s decision to hold interest rates and pause their much-publicised Quantitative Easing program. This may have been seen as a positive in many investor’s eyes however the market did not reflect this.

This linked to the rolling debt problems in Greece and Spain; makes it even more surprising that Sterling has failed to make significant gains against the single currency. With a potentially difficult week ahead for Sterling exchange rates, the importance of staying in close contact with your account executive here at the Foremost Currency Group is imperative as any bad data could damage the inherently fragile Pound and greatly magnify the cost of overseas purchases.

Opinions released yesterday evening by the Ex-IMF chief economist, Simon Johnson, said that the UK should be viewed as lying in the same category as the Spanish and Greek Economies. The debt problems in these two economies have been heavily highlighted in the last week, and any similar trend seen in the UK could have catastrophic consequences for the Pound.

Any clients looking to purchase Euros, may wish to investigate a forward contract with FCG. This allows the client to protect their interests by purchasing ahead with a deposit at the prevailing rate for anything up to two years in advance.

Looking to the week ahead we have figures due for; Germany’s consumer price index, the UK’s trade balance and most importantly on Friday the GDP estimate for the fourth quarter in the Eurozone. As demonstrated earlier; data releases do not always have an obvious and immediate impact within the FOREX market and further underlines the relevance of speaking with your trader at the Foremost Currency Group.

Pound vs US Dollar
Last week we witnessed a 3% decline in GBP/USD exchange rates as investors once again placed their money with the save haven of the greenback. In real money terms this meant a difference of around $8000 based on a £200,000 transfer. The movement came as a surprise to many with the UK pausing its Quantitative Easing program and showing improved producer price index figures.

That coupled with worse than expected non farm payroll details from the US could have easily pointed to Dollar weakness however it did not materialise. What this information shows is that even with positive data releases gains cannot be guaranteed and often the currency markets will move in an unexpected fashion. This highlights the importance of keeping in touch with our professional currency brokers here at The Foremost Currency Group who can help to maximize your currency requirement with information to try and conduct your transfer at the best possible time for you.

The week ahead sees a clutch of economic data releases starting with trade balance figures for the UK on Tuesday morning at 9:30am. This is followed on Wednesday by the Bank of Englands quarterly inflation report with Governor King speaking moments after. King is likely to give a further insight into the UK economy and our future outlook with QE and potential interest rate movements being on the agenda.

In the past we have seen Sterling volatility off the back of the governors speech so it could be wise to be in touch with your account manager here at FCG to let them know of your individual requirement. At FCG we can act as your eyes and ears on the currency markets and help you make the best decision for your transfer. If you have yet to open a trading facility with us you can open one in a matter of minutes by clicking here.

News from the US this week includes trade balance figures on Wednesday at 1:30pmGMT which is expected to improve and jobless claims figures also set to improve on Friday at 1:30pm GMT.

In what could be a testing week for Sterling exchange rates you may wish to explore the option of a forward contract where you can protect your requirement from potential losses with a small deposit taking the risk out of the market. For more information on forward contracts and the many tools at our disposal to help with you transfer call today on 01442 892060.

This Weeks Data
For the UK
, Wednesday is the main day for data releases this week. We have production data for both industrial and manufacturing sectors. The Bank of England has an inflation report and a speech scheduled, and most importantly we have the NIESR GDP Estimate.

The Gross Domestic Product (GDP) Estimate released by the National Institute of Economic and Social Research (NIESR) is a GDP estimate report that comes out a month before the official announcement. The report is highly reliable and would influence the UK monetary policy. We expect the estimate to be +0.3%. Any difference and we expect Sterling volatility. Also watch for Retail Sales, house price and trade balance data Tuesday. Trade Balance is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP.

In the Eurozone, the UK data will have the biggest impact on GBP/EUR rates this week, but watch for Gross Domestic Product data on Friday. Quarterly growth is expected to be 0.4% – more than this then GBP/EUR may fall, and vice versa.

In the USA we have Trade Balance data and employment information, both of which could affect USD value. Elsewhere, Aussie Dollar buyers should look out for the Australian employment data on Thursday. Currently at 5.5%, if the rate rises, then this indicates a lack of expansion within the Australian labor market. As a result, a rise leads to weaken the Australian economy and thus a cheaper AUD.

Tuesday
UK – Retail sales
Ger – Consumer Price Index
UK – House Prices
UK – Trade Balance

Wednesday
UK – NIESR GDP Estimate
UK – industrial Production
UK – Manufacturing Production
UK – BoE Inflation ReportUK – BoE Governor Speech
US – Trade Balance

Thursday
Aus – Unemployment
EU – ECB Monthly Report
US – Jobless Claims
US – Retail Sales


Friday
Ger – Gross Domestic Product
EU – Industrial Production
EU – Gross Domestic Product
US – Consumer Sentiment


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