18th August 2010
Good morning. The pound slipped yesterday against both the US Dollar, Euro, and most major currencies. Low inflation figures were largely to blame. Today we’ll look at this, and also the effect this mornings BoE minutes will have. First the snapshot of rates as at 08:30am:
- GBP/EUR 1.2095
- GBP/USD 1.5533
- GBP/AUD 1.7245
- GBP/NZD 2.1822
- GBP/CAD 1.6028
- GBP/CHF 1.6174
- GBP/ZAR 11.289
- GBP/JPY 132.70
- GBP/NOK 9.5664
- EUR/USD 1.2839
Low inflation hits Sterling
UK inflation eased to 3.1% in July from 3.2% in June, the third month in a row that prices have risen more slowly. However, the Consumer Prices Index (CPI) is still well above the Bank of England’s 2% target rate, although it’s unlikely to change the view that interest rates will remain low for some time.
Last week, the Bank said it expected inflation to remain higher than forecast in the coming months, largely because of the rise in VAT to 20% in January next year.
Also pushing the GBP/EUR rate down with the fact that the Euro was boosted after Ireland managed to sell 1.5 billion euros in government bonds even as investors remain concerned about the country’s banking sector, which suggested improving risk appetite. This strengthened the single currency, making it more expensive to purchase.
Key data today; BoE Minutes
The key data today is the Bank of England minutes. These will reveal how the Monetary Policy Committee (MPC) voted for their recent decision to hold interest rates at the record low of 0.5%, despite higher inflation.
The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the BoE is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the Pound.
What we’re looking for is how many voted for a hike. We expect 1 member, Andrew Sentance to have voted for a rate hike. If 1 other member has joined him, expect Sterling strength. If 1 or less voted for a hike, we expect the pound to come under pressure and rates to fall.
How to achieve the best rate, and not get caught out
Regardless whether you are buying or selling a foreign currency, today’s data will likely move rates one way or the other, as the minutes often cause significant volatility. If you wish to avoid adverse fluctuations, contact us before 09:30am to fix a rate.
If you wish to take a gamble on the data moving rates your way, then you can employ a Stop Loss order to mean if rates move against you, you can set a level whereby if rates fall below a specific rate, your currency is automatically secured, limiting any loss and giving you some control over the cost of your currency purchase.
Click the links below to send us an enquiry today, and find out more about our commercial exchange rates, and contract types not available through the banks. Our rates are up to 6% better than the banks will offer you, and so the savings can be significant.