Good morning. After the usual snapshot of rates this morning, we’ll have a detailed look at the outlook and forecast for Sterling to the Australian Dollar (AUD), New Zealand Dollar (NZD) and US Dollar (USD).
Sterling hit an 18 month high against the Euro yesterday after reports of funds moving out of Germany in favour of gilts. Worries over problems in the euro zone plagued the single currency yet again, weakening it and providing attractive buying levels. Rates at 08:30am:
- GBP/EUR 1.2128
- GBP/USD 1.4507
- GBP/CAD 1.5284
- GBP/AUD 1.7704
- GBP/NZD 2.1882
- GBP/CHF 1.6860
- GBP/ZAR 11.260
- GBP/JPY 133.03
- GBP/HKD 11.318
- EUR/USD 1.1960
Pound vs Australian Dollar
Sterling resumed its upward trend against the Australian dollar at the end of last week and has struck a five-month high in trading this morning as risk aversion remains. The weak US jobs figures had a strong global impact, and losses on the US stock markets were mirrored in Asia with the Nikkei 225 dropping nearly four percent.
This led to a sharp sell-off in higher yielding currencies, a trend which is continuing this morning with sterling currently trading up a full percent and the price above 1.77. Domestic data today illustrated that the economic outlook in Australia remains upbeat with job advertisements jumping in May and construction activity again on the rise.
Yet the markets are now pricing out any chance of another rate rise in coming months. Reserve Bank of Australia Governor Glenn Stevens speaks on Wednesday and the market will be keen to hear if he is still as confident that Australia can withstand the ongoing woes spreading from the eurozone.
Pound vs New Zealand Dollar
In line with the broad market movement, the kiwi dollar headed lower on Friday as risk aversion heightening following US data. High-yielding, commodity linked currencies have come under broad pressure in recent sessions with market sentiment strongly anti-risk and global equity prices tumbling.
It will now be interesting to see how the Reserve Bank of New Zealand reacts at their meeting on Thursday (Wednesday British time). They are expected to follow Canada’s lead and raise rates, though the accompanying statement may give a less optimistic outlook than has been hoped. Currently the pound is trading two cents higher this morning, with the price comfortably over 2.18 and nearing a three-month high.
Pound vs. US Dollar
The past few weeks have proved bearish for GBP/USD after the US Dollar has strengthened in light of its safe haven status. With continuing concerns over the world economy and in particular the Euro zone, the Dollar has seen an increase in demand as Investors retract from riskier investments.
However, contrary to recent weeks, last week saw a relatively stagnant market despite the early news of Spain’s credit rating downgrade. The credit ratings agency Fitch downgraded the debt burdened country from AAA to AA+ over concerns for its high unemployment rate.
Despite expected dollar gains GBP/USD remained relatively stable after strong Manufacturing PMI data on Monday and Services PMI data on Wednesday. Both pieces of data dominate a large part of total GDP and are important indicators of current business conditions and the overall economic condition in UK.
On Friday we had the US Non Farm Payrolls, a measure of employment across all sectors excluding agriculture because of its seasonal volatility. The results, renowned for effecting dollar behaviour, where predicted at record high levels suggesting dollar strength. However, as is often the case the official result recorded a shortfall and took little effect on rates.
With a whole host of economic data from both sides of the Atlantic and the risk of further world economic upset, there is a chance of added volatility on the markets. To protect your transaction speak to your FCG Account Manager about Stops and Limits which can help you catch the market at any high and protect you from any adverse market movement.
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