Pound vs Euro & Pound vs US Dollar forecast

Good morning. The pound remains strong this morning, but where may rates move this week? Lets have a look at what’s been happening in the markets, and this weeks events that could cause further volatility. First, the usual snapshot of rates as at 09:00am 28th June 2010:

  • GBP/EUR 1.2160
  • GBP/USD 1.5030
  • GBP/AUD 1.7219
  • GBP/NZD 2.1221
  • GBP/CAD 1.5570
  • GBP/CHF 1.6343
  • GBP/ZAR 11.358
  • GBP/JPY 134.39
  • EUR/USD 1.2357

Pound vs Euro / Pound vs US Dollar

Sterling appreciated against the USD and Euro last week following Chancellor of the Exchequer George Osborne’s delivery of a tough but balanced budget and although the measures outlined would mean higher taxes and spending cuts investors reacted favourably towards Sterling.

In the emergency budget Osborne revised down growth forecasts for 2010 and warned that unemployment would reach 8.1%. Strength for Sterling came from the tax policy and despite the VAT increase to 20% in January 2011, tax relief measures on corporate taxation and the fact that the VAT increase would not impact fuel costs were both seen as very positive measures to support economic recovery and stimulate industry in the UK. Further support came from Fitch rating agency who called the UK budget a ‘strong statement of intent’, rating agencies in the past have heavily criticised the UK debt levels and the positive statement encouraged investor confidence. Moody’s rating agency followed suit the following day and provided additional market confidence after it released a statement saying they felt the UK budget was broadly in line with expectations and addressed all the major concerns on economic growth.

The only other positive remaining event for sterling last week was the Bank of England minutes that revealed a surprise 7-1 voted on interest rates. MPC member Andrew Sentance voted for a rate hike. Sentance also went on the say that he felt despite current uncertainties it was appropriate to begin to withdraw gradually some of the exceptional monetary stimulus. The minutes boosted Sterling across the board as traders priced in the possibility of future rate hikes and investor risk appetite increased.

In the coming week markets will open to the G20 meeting, although the likelihood of a definitive statement addressing the European debt crisis is unlikely, a lack of unity could unsettle the markets and allow for safe haven buying into the dollar.

With Market confidence restored after last week’s budget announcement and the commitment from the UK government to take aggressive measures to reduce Britain’s deficit, Analysts are now concerned that the lower spending power could have a negative impact on growth and as such could cause further volatility for Sterling.

Former BoE member Blanchflower, recently warned of the possibility for a double-dip recession in the UK and this could add to market jitters ahead of the GDP release. For an in depth view into what may affect your currency requirements please see our market data section below or contact us for a personal consultation.

This Weeks Data

The weekends G20 meeting will likely have an impact this week, as the EU debt crisis was the focus of discussions over the weekend. Last week we hit a 19 month high against the Euro and a 6 week high against the US Dollar. Any announcements could cause volatility in rates.

If a clear plan is agreed to assist the EU that appeases the markets, the currency could strengthen and GBP/EUR rates could fall back away. If however no clear plan is agreed, and investors remain wary of investing in the Eurozone, we could see the Euro continue to remain weak and good buying levels remain.

The main fundamental data for the week is as follows:

Monday

Inflation data from Germany the main news today, which is an indicator to measure inflation and changes in purchasing trends. A high reading may cause GBP/EUR rates to fall. Elsewhere we have house Price data for the UK that gives an idea how the overall economy is faring. In the USA we have core personal consumption which again is an inflation indicator.

Tuesday

Today is all about confidence, and the focus is on the EU. We have consumer confidence, industrial confidence, Economic confidence and services confidence. Basically, if the measures show they are confident then the Euro may gain. There’s not much to be confident about in the EU at the moment, but developments from the G20 meeting may change this. Later in the day we have UK consumer confidence. I said confidence 8 times in this section. Wow.

Wednesday

More significant data today – from the UK we have Gross Domestic Product. GDP is considered as a broad measure of the UK economic activity and health. Generally speaking, a rising trend has a positive effect on the GBP, while a falling trend is seen as negative. Unemployment measures from Germany and the US today should also be taken into account.


Thursday

Inflation data is the only UK release of note. With the BoE minutes last week showing a vote for higher rates, a high inflation reading could cause the pound to rally slightly. Building permits from Australia and commodity prices from New Zealand may affect the antipodean currencies today. In the US, various jobless measures may affect GBP/USD rates.


Friday

Producer Prices from the EU will give an indication of future interest rate movements in the UK. There are also unemployment measures for the EU that may affect GBP/EUR rates. The most important release is the non Farm Payrolls from the USA. As these are so hard to predict, the figure often is significantly different than forecast and so can cause big swings in GBPUSD rates. If you need to buy or sell dollars, speak to us before this release to ensure you are protected.

If you are looking for the best exchange rates, click the link below to send us an enquiry, and have a free consultation on what’s happening in the currency markets.

If you are looking for the best exchange rates, click the link below to send us an enquiry, and have a free consultation on what’s happening in the currency markets.

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