Sterling gains on PMI data; QE eyed for Thursday

2nd November 2010
Good morning. Sterling rose against the euro on Monday after better than forecast UK manufacturing data. This boosted confidence in the UK’s economic recovery and reduced the chances of fiscal stimulus from the Bank of England on Thursday. Rates at 08:30am are as follows:

  • GBP/EUR 1.1512
  • GBP/USD 1.6069
  • GBP/AUD 1.6049
  • GBP/NZD 2.0914
  • GBP/CAD 1.6234
  • GBP/CHF 1.5865
  • GBP/ZAR 11.147
  • GBP/NOK 9.3756
  • GBP/JPY 129.37
  • GBP/ZAR 11.148
  • EUR/USD 1.3955

Pound gains on PMI data

The Purchasing Managers Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

The figures were much better than expected, and coupled with the better GDP data last week, provided some support for the pound and helped push Sterling higher against most currencies including the Euro.

The results mean analysts now think there is less chance the Bank of England will continue Quantitative Easing on Thursday. Under such easing, the central bank would pump more pounds into the system by purchasing more UK assets from the market, which would lead to a currency depreciation.

“Sterling is off the hook with respect to QE, at least for now,” said Jane Foley, senior currency strategist at Rabobank, who predicted the rally against the euro could continue. “There’s an awful lot of bad news in the price of the pound and plenty of scope for sterling to appreciate next year if the news consistently surprises on the upside.”

Things aren’t always so black and white however. The two pieces of good news (GDP & PMI) have helped push GBP/EUR from €1.1170 to €1.1550 in just a week. This illustrates how quickly things can change. Any bad news would very quickly cause these gains to be reversed. For this reason, contact us today to discuss how to still hold out for a higher rate but have protection should rates move against you.

Australia raises Interest Rates

As we predicted yesterday, the RBA hiked rates to 4.75%, strengthening the AUD and pushing exchange rates down. The higher return on funds is attractive to investors, and this trend is now likely to continue.

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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