Pound vs Euro driven by election and problems in Europe

Good Morning. The pound rallied to levels above 1.16 yesterday afternoon but has since fallen back to open this morning at 1.1520. It is a similar story against the Dollar. Mortgage approvals are the main release today from the UK but probably wont have a huge affect on the Pound so expect the election, and the situation in Europe to be the main drivers. Rates @ 08:55am are as follows:

  • GBP/EUR 1.1514
  • GBP/USD 1.5383
  • GBP/AUD 1.6645
  • GBP/NZD 2.1347
  • GBP/CAD 1.5411
  • GBP/ZAR 11.308
  • GBP/JPY 144.29
  • GBP/CHF 1.6530
  • EUR/USD 1.3355

Market Report W/C 26th April 2010


GBPUSD exchange rates remained relatively stable during the early part of last week, trading around the 1.53 mark on the Inter Bank for the majority if the week.

Both currencies were particularly strong, Sterling as a result of positive CPI data and the Dollar in light of its safe haven status. Higher than expected inflation data from the UK helped to fuel speculation that the Bank of England may decide to raise interest rates ahead of schedule and continue to off set any further Quantitative Easing.

The Dollar, which remained strong throughout the financial crisis, found further strength after the SEC announced an investigation into the recent actions of investment bank Goldman Sachs. Accused of taking an unnecessary risk in its latest mortgage lending, concerns spread that the banks had not learnt from their past mistakes. As a result investors’ confidence fell and demand for the Dollar rose. Further strength for the Greenback came from Greece when investor confidence hit a low when credit ratings agency Moody’s downgraded the Greek economy from A2 to A3.

With the end of the week came a number of economic releases from both sides of the Atlantic. US releases included PPI and Home Sales data and all recorded a positive result for the dollar. Finally, Friday saw the release of UK GDP which saw a lower than expected 0.2%, causing GBP/USD to briefly fall below the 1.53 barrier.

Looking forward to the coming week there is a possibility that the market will become more volatile as the Goldman Sachs investigation and the Greek situation continue to unfold. To take advantage of any spikes in the market and to protect yourself from any losses ask your FX Trader about Stops and Limits.

This Weeks Data

Below is an outline of the week’s data releases. Economic data is something that can have a big impact on exchange rates and the cost of your currency, and so is important to consider.
Economic Data from the UK this coming week is sparse, however Sterling exchange rates may still be affected inversely by data releases from around the world.

Do bear in mind that in addition to the scheduled releases, unexpected news such as opinion polls with regards to the election and developments in Greece will also have an effect on exchange rates. For this reason giving your FX trader an outline of your requirements mean you can be kept up to date with developments that may impact the cost to you.

Producer Price Index (PPI); for Australia, It’s a leading indicator of consumer inflation – when producers charge more for goods and services the higher costs are usually passed on to the consumer, Actual or more than Forecast is Good for AUD. For the UK and USA we have consumer spending data, Actual or more than Forecast would be positive for the respective currencies.

Will be a Quiet day for the UK; however Australia sees inflation data releases which will be closely watched for signs of yet further rises in interest rates. The Federal Open Market Committee (FOMC) Statement takes place later in the day for the US market. It’s the primary tool the FOMC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook. A positive sentiment from this statement has the ability to cause volatility in the markets and would be worth keeping an eye on.

We finally see some economic data from the UK. House Price Index (HPI) is a leading indicator of the housing industry’s health because rising house prices attract investors and spur industry activity this could provide Sterling support if the data returns 0.4% or above. The US has another important release today Unemployment Claims which would need to return as expected or less to spur USD strength.

The only Data release of note today takes place in the US, the first quarter Gross Domestic Product (GDP) results, it’s a key piece of data which could provide volatility in the USD/GBP cross as It’s the broadest measure of economic activity and the primary gauge of the economy’s health. Actual or more than Forecast could result in USD strength.

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