Good morning. It’s Monday morning, so let’s take stock of movements in GBP/EUR and GBP/USD over the last weeks trading, in our Monday weekly round-up. In this week’s Report:
• GBP/EUR falls from 6 month high
• GBP/USD remains near 8 month low
• Round up of the week’s data that may affect rates
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Sterling vs. Euro;
Speculation of the possible downgrade of French banks at the beginning of the week saw the rates increase. This was shown when the Credit Rating agency Moody’s downgraded two French banks after reviewing their exposure to Greek debt. Credit Agricole was cut from Aa1 to Aa2 and Societe Generale from Aa2 to Aa3. A third bank, BNP Paribas, is being kept on review for a possible downgrade.
As the week progressed five of the World’s central banks announced a move to help resolve the Eurozone financial situation. The Federal Reserve, Bank of England, European Central Bank, Bank of Japan and Swiss National Bank will provide additional lending, and follows the fears about the exposure of banks in the EU and the potential collapse of the Eurozone during the debt crisis.
This strengthened the Euro and pushed rates back down from the highs we saw at the beginning of the week.
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Sterling slipped against the Dollar on Friday to trade within sight of 8 month lows, hit by signs that Bank of England officials were edging closer to more UK monetary stimulus, as investors watched events in the Eurozone closely. “The QE discussion is gaining momentum in the UK and is likely to keep GBP under pressure,” said Morgan Stanley analysts in a note.
Manufacturing data from the US yet again disappointed to the downside with Empire state manufacturing and the Philly fed both posting negative readings in August. The data was virtually ignored by equity markets but with unemployment remaining persistently high in the US, traders cannot be too confident of a global recovery getting back on track. Not a single job was created in August and this is the first time that has happened since 1945.
A story of note from last week revealed that more than £4 billion was wiped off UBS shares as losses of $2 billion were uncovered stemming from trades put on by a trader in their London office. After Nick Leeson and Jerôme Kerviel, it seems that another ‘rogue’ trader is about to enter the banking history books. This time it’s the turn of the Nottingham University educated, Kweku Adoboli.
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Weekly Economic Data that may affect exchange rates
Monday – A very quiet start to the week, with only Nationwide House Prices for the UK. There is also some housing data from the US later in the afternoon.
Tuesday – Again quiet for the UK, with no data of note. In the EU, we see lots of figures from Germany including inflation data, and German and EU economic sentiment surveys. In the US we have an interest rate decision & the FOMC minutes. We also see RBA minutes which could affect GBP/AUD rates.
Wednesday – Public sector borrowing is released today for the UK. This shows the deficit and can affect the value of the Pound. More importantly, we see the BoE minutes to the recent interest rate decision. Watch carefully for any mention of Quantitative Easing being discussed. If so, it could knock the pound significantly. Nothing from the EU today, but from the US later in the day we see various housing figures.
Thursday – Canadian Retail Sales are released at lunchtime, followed by Jobless numbers from the USA. There are no releases from the EU or UK today.
Friday – There is no data of note today.
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