Yesterday's Currency Movements
After an intial decline in Sterling Exchange rates in early trading yesterday, Sterling rose broadly throughout the day yesterday, boosted by stock market gains, a UK government plan to insure banks' toxic assets and the fact that losses at Royal Bank of Scotland that were less than feared, although still massive.
The British government also yesterday announced a scheme under which it could end up insuring more than 500 billion pounds of bad assets in an attempt to get lending flowing again.
Spikes in Sterling exchange rates have been few and far between recently, with the general view of the UK economy being extremely poor. Despite the slight claw back Sterling made, the view of the majority of analysts is that Sterling will continue to be outperformed by the other leading currencies throughout this year, including the Euro and US Dollar.
This could be time to consider locking in the rates that are currently more than 10% better for Sterling to Euro than in January. As interest rates are cut further, and money pumped into the economy through quantitive easing, then it is likely the value of the pound will fall in the coming months.
Rare good news for UK
Figures released yesterday show that UK consumers were a little bit more confident in the month of February. The data was released by pollsters GfK NOP on behalf of the European Commission.
Its overall consumer confidence index rose to -35, which was up two points from January, but 18 points down on the same month of 2008.
More Bank Losses
Lloyds said this morning that HBOS, the mortgage lender it took control of in January suffered a loss in '08 10.8 billion pounds as it was hit with £9.9 bn pounds of losses - mainly being bad loans and credit market losses.
The bank said the former Lloyds TSB business made a profit of 807 million pounds, down from 4 billion pounds the year before, as its impairments jumped to a staggering 3 billion pounds.
HBOS's loss was in line with guidance Lloyds gave two weeks ago in a profit warning. This means that the combined group made a statutory loss of 10.1 billion pounds, compared with a combined profit of 9.4 billion in 2007.
Todays Data
This morning we have Consumer Price Index (CPI) data for Germany and the EU. This measures the average price change for goods and services purchased by households. CPI is the main indicator to measure inflation and changes in purchasing trends. A high reading in either of these would be seen as positive for the Euro, strengthen the currency and lower GBP EUR Exchange rates.
This afternoon we have various data for the USA, including GDP figures. This shows the monetary value of all the goods, services and structures produced within a country in a given period of time. It is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. The figure is expected to be -5.3% showing a severe contraction of the US economy.
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Enjoy your weekend.
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Labels: EUR, Exchange Rate Forecast, GBP, Sterling Outlook, USD
