Wednesday 13th July 2011
Good morning. Sterling lost ground against all currencies yesterday, as inflation figures were much lower than expected, as were retail sales and trade balance figures. This shows the Pound is incredibly weak at the moment, despite the problems in the Eurozone. We’ll look at this in a moment after the usual rate snapshot as at 08:30am:
• GBP/EUR 1.1360
• GBP/USD 1.5975
• GBP/AUD 1.4954
• GBP/NZD 1.9328
• GBP/CAD 1.5352
• GBP/ZAR 10.888
• GBP/JPY 126.72
• GBP/DKK 8.4705
• GBP/NOK 8.8642
• EUR/USD 1.4058
Sterling weakens on poor economic data
Inflation figures, Retail Sales, Trade Balance figures, Consumer Prices and House Prices – these are the data releases we had yesterday, and all of them were much worse than expected. This pushed Sterling lower against other currencies, and the spike vs the Euro was also short lived, with GBP/EUR losing over a point during trading yesterday.
The data goes to show that the UK economy is very fragile, and interest rates are unlikely to rise for at least a year, which will keep Sterling weak and limit any gains in exchange rates. Analysts said sterling would be pulled around by moves in the euro against the dollar and developments in the euro zone debt crisis.
So with all the problems in the EU, why aren’t GBP/EUR rates higher?
There are significant problems in the Eurozone, with Italy and Spain having similar problems to Greece and Ireland. The debt crisis has weakened the Euro significantly. Many have been asking why this hasn’t resulted in much higher GBP/EUR rates.
Firstly it’s important to note that the Euro is at it’s lowest vs the Swiss Franc and US Dollar in many years, however against Sterling it remains fairly strong. This is partly due to the fact interest rates are higher in the Eurozone, but also because the UK is a close trading partner, and of course part of the European Union, meaning we have also been involved in bailing out troubled countries.
Sterling is a risky currency, and so when there are times of economic uncertainty as there are now, investors move to safe haven currencies such as the US Dollar and Swiss Franc. This compounds Sterling’s problems, and this is why rates remain low despite all the issues in the Eurozone.
So what should you do if you need to buy or sell Euros?
Will Pound EUro rates go up in July? Will GBP/EUR rates go down? The last few weeks have illustrated the swings we can see, with rates between €1.10 and €1.14 in the last week alone. The currencies are being pulled in different directions due to interest rates and EU debt problems.
We think rates will continue to fall, but there is so much uncertainty things could go either way. In times like these Stop Loss and Limit orders are very useful, as they allow you to aim for a higher rate but have a safety net should rates move the wrong way. To find out more about how these contracts work, send us an enquiry today.
Today we have EU Bank stress tests, which will determine how able they are to weather a financial storm. There are also EU Industrial production figures released today. From the UK we have various measures of unemployment. It’s also quite a busy day for US data, with Mortgage Approvals, Import prices and a budget statement all likely to affect cable.
If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.