Foreign Exchange Rate Forecasts: Sterling Exchange Rate Outlook

Rates for pound euro dropped as low as 1.0550 yesterday morning, before recoving to 1.0630 this morning. The reason for the drop can be attributed to the FED announcement of pumping funds into the economy.

This weakened the dollar, and generally when the dollar weakens investors move funds to the Euro which in turn strengthens the currency. We often see this, and its the reason rates for dollar shot up where rates for Euro dropped.

As you can see from the chart, we saw a massive increase in serling dollar rates yesterday. In just a week we have seen rates go from 1.38 to 1.4550. Great opportunities to buy dollars at better levels. Buying $150k became £5600 cheaper in just a few days.

Sterling actually rose to a 3 week high against the US dollar yesterday, reversing early drops as the dollar weakened broadly after the U.S. Federal Reserve's surprise move to buy long-term Treasuries.

The pound was little affected by weak UK economic data released on Thursday, overshadowed by the dollar's bearish trend. Yesterdays report outlines the FED actions and why this affected cable.

The central bank of crisis-hit Iceland has cut its interest rate to 17%. The rate cut is the first since Iceland agreed a $10bn financial aid package with the International Monetary Fund.
The Sedlabanki cut rates by one percentage point from 18%, where they had remained since October on the recommendation of the IMF.

They shouldn't have a problem with liquidity though, as I believe they have all the UK council money ;-)

Very little data today. Producer Price Index for Germany. Interest rate decision by Turkey (I think they will cut rates by 1% to 10.5%)

Other than that we just have some industrial production data for the EU and retail sales data for Canada.

No Bonus for US
US lawmakers in the House of Representatives have voted in favour of a bill to impose a 90% tax on big bonuses from firms bailed out by taxpayers. The move follows outrage over the decision by AIG to award its employees £113 million in bonuses after taking $170bn in aid from the government.

House Speaker Nancy Pelosi said: "We want our money back and we want our money back now for the taxpayers." President Barack Obama welcomed the result of the vote saying "Now this legislation moves to the Senate, and I look forward to receiving a final product that will serve as a strong signal to the executives who run these firms that such compensation will not be tolerated," Mr Obama said.

Will we see a similar move here in the UK in response to the big payouts for the likes of RBS's Fred Goodwin?

Enjoy your weekend. If you have questions regarding the currency markets and the effect on your requirement, feel free to get in touch. Email me below.....