Pound vs EUR, Pound vs USD, Fundamental Data

4th October 2010

Good morning. Today we’ll have a look at recent movements in GBP/EUR and GBP/USD. In addition we’ll look at the weekly data that may affect rates.

Pound vs Euro

Once again the GBP/Euro pairing was volatile last week with highs reaching 1.1807, lows of 1.1509 and an average exchange rate of 1.1686. This equates to a difference of 2.59% between high and low leading to a difference of €6,475 on an exchange worth €250,000.

Last week saw the publication of UK GDP data which temporarily caused a positive shift in the value of Sterling. This was short lived and the value of the Pound against the Euro dropped off towards the end of the week.

Sterling has been relatively strong against the other major currencies last week leading analysts to speculate that it is primarily Euro strength which is causing the movement. The value of the Euro has managed to rise even in the wake of the increased bailout of Anglo Irish Bank and the downgrading of Spain’s credit rating.

Looking to the week ahead the Euro could strengthen further on the back of the announcement of Germany’s Purchasing Manager Index Manufacturing which is expected to be bullish. The PMI measures the level of goods manufacture in the Eurozone’s strongest economy and therefore indicates consumer purchases and German trade levels.

On Thursday the BoE announces its interest rate decision. A Hawkish outlook from the Bank and a rate rise would be positive for the value of Sterling against the Euro. However it is important to note that the BoE have not indicated a rate rise and dovish comments could see GBP lose more ground to the Euro.

Both of these announcements could mean it is the ideal time for Euro buyers to capitalise. The points raised emphasise the volatility of the market and the necessity to remain in close contact with your account manager here at FCG. Small changes in exchange rates can lead to large differences in transactions so utilising the expert knowledge and professionalism of FCG can help you save thousands of Pounds.

Pound vs US Dollar

Cable saw a relatively stable past week, opening at 1.58260 and having a percentage difference of 1.6% between high and low. As the week progressed we saw an incline, possibly due to encouraging data publications, released Tuesday, of the UK’s 2nd quarter GDP figures.

At 1.2%, positive statistics implied growth in the economy, and a reason why the GBP may have gained value. The pattern continued to move optimistically up until Wednesday morning, when levels fell from 1.5893 to 1.5737 before rising once more.

The decline may have been due to an expected drop in UK mortgage approvals in August. This implicates poor economic growth, thus leading to a drop in Sterling value. The subsequent increase continued to be the trend until Thursday morning where it reached the week high of 1.5916, before dying off in the evening to a week low of 1.5668. As the week came to a close the GBP saw more promising movement.

If data released Monday sees the consensus figure come out as predicted, we will see pending home sales in the US fall from last months 5.2% to 2.6%. This drop may have a negative effect on the dollar, and we could see the GBP/USD pair increase.

This week we will see the release of the US non-farm employment change data. Expected figures are to be around 22,000; a large increase from the previous months figures suggesting positive growth in the US economy. If actual figures surpass expectation the results could see an increase in strength for the dollar and a decline in cable. If you are looking to buy dollars it is definitely worth getting in contact with your account manager here at FCG, as taking advantage of the current height in rates could be valuable.

As previously mentioned, keeping in close contact with your account manager here at FCG can put you in the best position to react before possible drops in the market. Fixing a current rate is possible with the aid of a forward contract, which can hold a level achievable today for up to 2 years in advance, preventing negative market movement from affecting your transactions.

Opening a trading facility with FCG has never been simpler, and is the first step to saving money on currency exchanges.

This week’s data

As usual, below we list the main fundamental data releases for the week. The releases will affect you in different ways, depending which currency you need to buy or sell. So, contact us today for a free consultation on how these releases may impact your currency purchase. Fully informed of what may move exchange rates, you can make a decision on when to fix your rate, and which contract may be best for you to reduce exposure to adverse rate movements.

A free consultation is the first step to taking control of your currency purchase, and not allowing the markets to control you!

The antipodean currencies, AUD and NZD may be in for some volatility today, as we see inflation data and commodity prices. From the UK, PMI data which is an inflation indicator may affect Sterling. The Eurozone also releases inflation data, so it will be interesting to see if this pushes GBP/EUR lower as has been the recent trend. Home sales data from the states along with factory orders rounds off the day.

Australia releases their interest Rate decision and Business condition data. If good, then GBP/AUD rates could fall below $1.60. From the EU, there are various inflationary measures along with Retail Sales. The EU economy is faring better than originally thought, and the Euro is stronger as a result. Further good figures could push rates lower.
From the UK, BRC Shop price data will show how confident consumers are.

EU GDP is the key release. It will show how the EU economy is growing. Markets expect a 1.0% Quarterly gain. More than this and GBP/EUR rates may fall even further. US release employment data this afternoon also.

A key day today, when we see interest rate decisions for the EU and UK. Rates are not expected to move, but any sign of further Quantitative Easing, or negative comments about the economy, then there could well be significant volatility today. Elsewhere, there are further jobless releases from the USA and Australia today.

UK producer prices are the key release today. It’s a measurement of inflation, and so can heavily impact the value of Sterling. Germany today releases trade balance data, that if very strong may increase the cost of buying Euros. The US has various earnings data, including Non Farm Payrolls. These are notoriously difficult to forecast, and so can often lead to big swings in GBP/USD. Get in touch to keep informed.

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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