Wednesday 2nd October 2013
Good afternoon. It’s been quite a volatile week in the currency markets so far, with Pound/Euro touching €1.20 on several occasions, before dropping back away as has been the case for a few weeks. Against the US Dollar, the Pound is up following the Federal shutdown. So in today’s report I’ll look at the effects on the Pound/Euro and Pound/Dollar exchange rate.
Pound/Euro rates are the best they’ve been all year, and this week touched €1.20 several times. It didn’t manage to break through however, and dropped back each time it tested the high. Today we had news from Italy and the ECB that has pulled rates back in to the mid €1.19’s.
Firstly, The European Central Bank (ECB) has kept its benchmark interest rate on hold at 0.5%. Recent economic data has shown that an economic recovery may be taking hold in the Eurozone. Eurozone factory activity grew for the third month running in September, according to a survey.
The euro also found some support on growing signs Italian Prime Minister Enrico Letta will survive a confidence vote later on Wednesday.
Both of these events gave the Euro back some strength, and pulled GBP/EUR rates down. I don’t personally expect rates to climb significantly higher, due to the fact it wouldn’t be in the UK’s interest to have a high rate. Should the rate climb above €1.20 we may see the Bank of England move to weaken the Pound, as a high rate would not help our recovery due to it making our exports more expensive to the EU.
All in all it’s a great time to be buying Euros, so if you need to do this, send me a free enquiry today to discuss the current rate and find out the rates that we can offer.
Against the US Dollar rates are also very attractive indeed. This is partly due to Sterling strength, but has also pushed higher due to events in the States. In the U.S., concerns over a partial government shutdown kept the dollar under pressure.
The US government has begun a partial shutdown after the two houses of Congress failed to agree a new budget. The Republican-led House of Representatives insisted on delaying President Barack Obama’s healthcare reform – dubbed Obamacare – as a condition for passing a bill.
More than 700,000 federal employees face unpaid leave with no guarantee of back pay once the deadlock is over. You can read more about it here on the BBC site.
It is the first shutdown in 17 years and the dollar fell early on Tuesday. The weakening of the US Dollar has pushed rates up into the $1.62’s as you can see from the chart.
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