What exactly moves exchange rates?

Monday 28th October 2013
Good afternoon. The weather in the South of England has been very unsettled in the last 24 hours to say the least, however in stark contrast, the currency markets have been very stable. 

With a distinct lack of data releases today, exchange rates have really only moved on sentiment, with Pound/Euro remaining between 1.17 and 1.1730, and Pound/Dollar showing slightly more volatility, dropping from 1.62 to 1.6130 throughout the course of the day, as you can see from the charts below. 

Pound/Euro exchange rate:


Pound/US Dollar exchange rate:

So what exactly moves the exchange rate?

There are several factors that move exchange rates, but by far the most important are economic data releases, such as Retail Sales, growth numbers & unemployment figures for example. These are already forecast well in advance, and exchange rates will already have priced in the expected results. What moves the rate is when the actual figures differ from expectations. 

For example last week US jobs numbers were forecast to show 182,000 new jobs. In fact only 148,000 were created. As this was worse than markets had expected, it immediately weakened the US Dollar and caused Pound/Dollar rates to rise.

So it’s these sorts of things that could affect your exchange rate, and so if you need to make a currency conversion, it’s important to know what releases are expected.

So as the market is quiet, today I will list below the main data releases scheduled this week that could affect exchange rates. 

Looking for the best exchange rates? Click here.

This week’s market data releases

Tuesday – There are only minor releases for the UK today, including Mortgage approvals and Lending data, all released at 09:30am. In the Eurozone we have German consumer confidence figures, which are closely watched as Germany is the EU’s largest economy. Other than that, all data is from the United States: Retail Sales, Inflation data, and consumer confidence.

Wednesday – Again another quiet day for the UK. Any moves in Sterling/Euro will largely be driven by EU data: Spanish GDP figures & German and EU inflation data. If the numbers are better than forecast, then we may see GBP/EUR drop further. Over in the USA we have some inflation numbers, and a statement by the Federal Reserve, both of which could affect Pound/Dollar.

Thursday – The only UK release today are consumer confidence figures. These are a good overall barometer of the economy, and so might affect the Pounds value. Eurozone data today includes Inflation numbers, and overall EU unemployment data. We also have some unemployment data from the United States, along with US inflation numbers.

Friday – We end the week with manufacturing numbers from the UK, which are expected to come in at 56.5.Any number over 50 indicates growth, so if the actual figure is higher than this, expect some strength in the Pound and a rise in exchange rates. EU markets are closed today, and over in the USA we have some inflation numbers which could dictate how long their QE programme goes on for.

Are you looking for the best exchange rates? 

If you need to buy or sell currency and are looking to achieve the best exchange rates, then why not send me a free enquiry. I can discuss your requirements, explain how the rate could move for or against you, and help you decide when to fix your rate. When the time comes to do this, I can help you achieve rates up to 5% better than banks or other financial institutions, which could save you thousands.

Click here to send me a free enquiry now. I look forward to hearing from you.

Alastair Archbold

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