Monday 12th September 2011
Good morning. As always on a Monday morning, today we’ll take stock of last weeks movements in Sterling vs Euro, Sterling vs US Dollar, and the weeks data that may affect exchange rates this week.
• Sterling down at 2 month low vs US Dollar
• Swiss National Bank peg CHF against Euro
• Most volatile week in currency markets for some time
• Round up of the week’s data that may affect rates (For currencies other then GBP, EUR and USD, contact us for a consultation) Sterling vs. Euro;
After a relatively slow start to the week, ECB comments on Thursday saw the Pound gain heavily against the Euro, ending the week very near a 6 month high. The Pound made a small advance against the Euro at the start of the week despite PMI services index for August falling from 51.1 to 50.4; the sharpest slowdown since 2001.
The Pound made a sharp reversal in the foreign exchange market on Thursday, despite the Bank of England keeping the interest rate at its record low. Sterling made impressive gains against the Euro, rocketing up from the morning’s open at 1.1322 to end the day at 1.1487. The Pound’s gains against the Euro came after less than impressive German trade balance figures were released. The Euro was further weakened after the president of the European Central Bank highlighted the downside risks to economic growth, with the market now expecting the central bank to make rate-cuts by the end of the year.
The GBP/EUR rate spiralled on Friday after Thursday saw the ECB cut eurozone growth forecasts and hinting at loosening monetary policy. The pound ended the day nigh on a 6 month high, breaking through the €1.16 level. Over the weekend we broke €1.17, however we have already seen rates start to decline by around 1 point so far today.
Sterling vs. US Dollar;
This week we saw the GBP/USD trade around the $1.59 level, it’s weakest since July 12th.This comes on the back of a rise against the Euro. Traders said losses accelerated after stop loss orders were triggered due to the sudden fall. There were reports the rate may reduce even further, bringing Julys low of $1.5781 into view.
Another factor which saw the Dollar gain ground against the pound was US President Barack Obamas’ $450bn (£282bn) package of tax cuts and spending plans aimed at creating jobs and bolstering the economy. He wants to fund huge construction projects, schools and services, while giving tax cuts to workers and small businesses to boost recruitment.
This news also bolstered the US Dollar, compounding its strength as a safe haven currency. This went further to pushing GBP/USD rates lower, hitting a 2 month low on Friday, despite rates to buy Euros nudging the best they have been in nearly 6 months.
To put last week’s market movements into perspective, a typical transfer of £200K would have seen you receive $4800 less than at the end of the previous week.
Monday– There is no data of note today, other than Trade Balance figures from Australia. Of course with such volatility in the markets, general demand or lack thereof will likely drive exchange rates today. Tuesday – UK data today comprises Retail Price Index, Trade Balance figures, and the Consumer Price Index. All of these are significant releases, and any negative numbers could easily reverse the significant GBP/EUR gains we saw last week. Wednesday – Unemployment figures are released from the UK today. There has been a run of poor UK data of late and this could compound Sterling weakness. From the Eurozone, we have industrial production figures. Stateside we will see Retail Sales, and various inflationary measures.
Thursday – From the US today we have further inflationary numbers, and Industrial Production figures. Other than that all data today is from Switzerland; an interest rate decision, Industrial Production figures, and inflation data. Given the effect the Swiss had on the markets last week, we will be keeping a close eye on these numbers. Friday – A quiet end to the week. Some Net flow data from the US and consumer sentiment survey also from the US are the only releases of note. 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.