Pound falls vs Euro on weak UK data

Friday 26th August 2011

Good morning. Sterling has fallen again vs the Euro and US Dollar, and we are now well down from the highs seen earlier in the week. It’s mainly due to poor UK Retail Sales, and also buying of the Euro causing it to gain strength. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1293

• GBP/USD 1.6295

• GBP/AUD 1.5548

• GBP/NZD 1.9580

• GBP/CHF 1.2879

• GBP/CAD 1.6076

• GBP/ZAR 11.754

• GBP/JPY 125.44

• GBP/DKK 8.4134

• GBP/NOK 8.8024

• EUR/USD 1.4425

Sterling falls again vs Euro and US Dollar

The Pound had gained in recent weeks as market turmoil across the world caused investors to shun risk, and this had driven investment towards the UK. We have been seen as a safe investment due to having stable government, a safe credit rating, and a fiscal plan in place to reduce our deficit. However, it seems the UK is no ‘Port in the Storm’, as highlighted by Stephanie Flanders, economics editor at the BBC. You can read her interesting take on this here on the BBC site.

What it means, is that the Pound has now started to drop back away now we have started to get economic figures that are quite poor, highlighting the weak growth we are seeing in the economy.

Market players said sterling may come under renewed pressure, given the UK economy is struggling and rate hike expectations have been pushed back into late 2012. Traders said the pound remains at risk of selling if data continues to show the economic recovery is stuttering, which would increase speculation that the Bank of England may opt for more “quantitative easing” stimulus. So, it’s likely we may see further falls for Sterling.

EU Banks may pull rates back up

Despite the recent falls in the GBP/EUR rate, EU banks are facing problems also, and it looks like this might develop further, and if so the Euro could weaken and pull rates in the other direction. In these volatile times Stop Loss and Limit orders can help you take advantage of any gains, while protecting against a fall in rates. Contact us today to discuss how these work.

Today’s Data

After yesterday’s German GDP figures, today is the turn of the UK. This will show at what pace the economy is growing, and is likely to have an impact on the value of Sterling. GDP is also released in the USA in the afternoon, followed by a speech from FED chairman Ben Bernanke.

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