Pound gains against Euro, but threat of QE limiting

5th October 2010
Good morning. Sterling staged a modest recovery against the euro yesterday as concerns about the health of peripheral euro zone countries weighed on the single currency. Today we’ll look at this, and also a look at the Canadian Dollar. First the usual snapshot of rates as at 08:30am:

  • GBP/EUR 1.1535
  • GBP/USD 1.5799
  • GBP/AUD 1.6533
  • GBP/NZD 2.1364
  • GBP/CAD 1.6201
  • GBP/CHF 1.5334
  • GBP/ZAR 11.064
  • GBP/DKK 8.5967
  • GBP/JPY 132.30
  • GBP/HUF 314.86
  • EUR/USD 1.3694

Pound gains against Euro

UK CIPS construction PMI was better than expected yesterday, and this helped push the pound up against the Euro following a 4 month low hit early Monday morning. However, the threat of further Quantitative Easing is keeping Sterling vulnerable.

More Quantitative Easing?

The Bank of England should consider pumping more money into the economy to help the recovery, according to a monetary policy committee (MPC) member.

External member Adam Posen advocated resuming the policy of quantitative easing (QE), under which the Bank has already pumped £200bn into the economy. But one of his fellow MPC members, Andrew Sentance, has said there is no need for such a monetary boost.

So, there is no consensus at the BoE regards how to move forwards, and this will give the markets jitters. The first round of QE didn’t seem to help much. The second round which is now expected, and dubbed ‘QE2′ will likely send the wrong impression of the state of the economy and put the pound under further pressure.

Pound vs Canadian Dollar

Last week the Canadian Dollar nicknamed the “loonie” fell to the weakest levels versus Sterling in more than 6 months benefiting those converting Sterling into Canadian Dollars following a
combination of factors.

A speech from the Bank of Canada Governor Mark Carney caused most of the damage prompting speculation that interest rates in the country would not rise for the
remainder of the year. Additionally with Crude oil being the nation’s largest export, the Canadian Dollar’s performance is also closely related to oil price trends, a modest oil price rise for the week provided little support for the currency.

Domestic economic data was generally weaker than anticipated; with month on month GDP returning lower than the previous month’s releases.

Crown Currency Exchange Collapses

Crown Currency Exchange, one of the UK’s foreign exchange websites, has collapsed – blaming the downturn in the travel market. You can read more about this on the BBC website here.

They offered rates above market, and effectively were speculating on rate movements in order to profit. This is inherently risky, and it looks as if they have been caught out. If something sounds to good to be true, it usually is; thousands of clients are now in limbo not knowing if or when their funds will be returned.

As an FSA authorised payment institution, trading with FCG is very safe. An authorised firm must ‘safeguard’ your money – this means your money must be kept separate from FCG’s money. So in the unlikely event FCG were to get into financial difficulty, your money will be safe and will be paid back to you if it is wound up.

We don’t speculate on the markets. We simply offer an execution only service, where by we offer a live market price just under the mid market level. We make our profits on the margin we buy and sell at, and so at no time are funds at risk due to speculation.

As we have such a large turnover, the volume we trade allows us to offer rates significantly better than banks and other financial institutions, without the risk involved when companies try to profit by betting on the markets.

Read more about our guaranteed security on our Customer Charter.

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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