• EU debt worries weaken the Euro significantly
• Concerns remain over UK growth and economic recovery
• Interest Rate speculation still the main driver for exchange rates
• Round up of the week’s data that may affect rates
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Sterling vs. Euro;
Sterling made strong gains throughout the week against the Euro broadly off the back of continued market commentary regarding the problem of the debt crisis in Greece. At its best the Pound gained almost 2 Cents against the Euro from where it started at the beginning of the week:
Problems continued for Greece and the Eurozone following comments made by Eurogroup President Jean-Claude Juncker who said that should the International Monetary Fund not pay its next tranche of aid to Greece, there would be pressure on reluctant European Countries to do so.
Commenting on the GBP/EUR cross, Ankita Dudani, currency strategist at RBS said “It’s a combination of news on the euro zone, including Juncker’s negative comments on Greece. There’s a lot of uncertainty about what a debt profile would contain and how far it may go -Sterling, on the other hand, doesn’t have the same baggage.”
Sterling vs. US Dollar;
Last week Cable hit a low of 1.6059 on Tuesday but just when it looked like we could see sub 1.60 rates for the first time since January, the US released a wave of worse than expected data forcing the rate back up to a high on Friday of 1.6463:
Closer to home, UK releases were surprisingly upbeat with a rise in consumer confidence and house prices while economic growth remained steady at 0.5%. Similar readings are expected next week so even if the current trend in GBP/USD doesn’t continue, we should at least see some stability in the market for the time being.
The key driver for Sterling is the interest rate expectation; currently most analysts don’t expect to see a rise in the base rate until at least the 4th quarter this year and this should be backed up by the fact that Andrew Sentance has now stepped down from the Monetary Policy Committee. He was the first of the 9 member rate setting team to call for an increase in the lending rate as early as June 2010 so his resignation would mean that there are currently only 2 members calling for a hike.
Weekly Economic Data that may affect exchange rates
Below we list the main data released for the week ahead. For a free consultation on how they could affect the cost of your currency requirement, open an account with us today. This is free to do, doesn’t obligate you in any way, and simply gives you access to our market knowledge and commercial exchange rates.
It’s was a Bank Holiday in the UK and US yesterday, however there were some Canadian GDP figures released.
There is no UK data today. The main releases are from the Eurozone; Unemployment, Inflation data and German Retail Sales. From the USA we have Consumer Confidence and inflation numbers. For Canada we have an interest rate decision, currently the rate stands at 1%.
It’s Australia’s turn for GDP figures today. For the UK we will see PMI manufacturing and Mortgage Approvals, that often causes volatility for Sterling. From the EU we have some inflation figures, which will give indications of interest rate movements. From the USA we have unemployment data and mortgage approvals.
Further jobless figures from the states today could cause GBP/USD volatility. The only UK release of note is PMI construction. Given the construction sector is dragging down the economic recovery in the UK, the numbers could well have an impact on the value of the Pound.
UK data today is Purchasing manager Index, and the EU also has the same release. It’s an overall indicator of economic health for both zones. The US has a raft of employment figures, including Non Farm Payrolls that often causes big volatility in GBP/USD, as it’s notoriously difficult to forecast.
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