Sterling GBP Euro EUR Dollar USD Exchange Rate Forecast

Sterling fell yet again yesterday to new multi-week lows on both the Euro and Dollar, as renewed risk-taking boosted the euro and hurt the dollar, while concerns about the British economy and banking system also weighed on the UK currency, causing rates to continue their downward spiral.

Already in this mornings trading, the Sterling Euro GBPEUR rate is down to 1.0770 and Sterling US Dollar GBPUSD is down to 1.3760 - getting close now to the lowest rate in 24 years.

The Bank of England's new venture into quantitative easing started yesterday, and was percieved as largely successful, though reaction in the currency market was very limited limited. The pound weakened against most currencies.

The BoE bought almost £2 billion pounds worth in gilts via a competitive auction. Banks offered to sell 10.5 billion pounds of the six gilts being targeted. The BoE has said it will spend a total of 75 billion pounds over the next three months buying mostly gilts.

Some analysts said the BoE's move to boost the money supply could start supporting the pound if it prompts commercial banks to resume lending. "It will take longer for efforts to boost bank lending in the United States to come through, while the three-month window in the UK should start to show results," said UBS's Yu. However the markets have shown little support for the measure, and the pound has actually weakened.

As I said in yesterdays report, the success of this measure all hangs on the banks actually using the money to boost lending and increase the flow of money into the markets. Many are sceptical that this will happen.

The big risk is that if lending does not increase, all the BoE will have done is cause a devalutation of the pound. This will translate itself into much lower exchange rates and foreign currencies becoming much more expensive. So, all hopes for an increase in Sterling value and with it higher exchange rates, hang on many unknowns right now.

If you have a requirements and you are worried about which direction exchange rates may go, then get in touch today to find out about the tools we have available to limit your exposure to adverse currency movements.

If you are risk averse and would prefer not to gamble on exchange rates, Limit Orders, Stop Loss Contracts and Forward Contracts can all limit your exposure to a very volatile market.

In some rare good news for the UK economy, the supermarket Morrisons beat forecasts with a 13 percent rise in annual profit. They have revealed they have scrapped plans to return 500 million pounds to shareholders, saying it would invest the money instead.

Britain's fourth-biggest food retailer, which serves around 10 million shoppers a week from over 380 stores, said this morning that profit before tax and one-off items reached 637 million pounds in the year ended February 1, topping analysts' average forecast of 627 million in a company poll. "In the current economic environment we expect the competitive landscape to be extremely challenging," it said.

However this good news is one grain of sand on a beach of economic gloom, so has not had in impact on the value of Sterling.

The financial crisis is not just affectingt the value of the pound - its also taking its toll on the world's richest people, wiping 332 names off Forbes magazine's "rich list" of world billionaires.

Only 793 people now appear on the list, and on average they have lost 23% of their wealth.

The stock market collapse helped Microsoft founder Bill Gates regain the lead, despite his wealth declining nearly $20 billion to $40bn. I think he still has enough to get by. He ousted investor Warren Buffet, whose fortune declined by $25bn to $37bn. With wealth decreasing, its even more important to get the best exchange rate possible - get in touch with us today if you need currency, regardless if you're on the list!

Todays Data
We have already seem employment data for Australia. Shortly we will see the monthly report from the European Central Bank (ECB), and also Producer Price Index data for the EU.

Also Germany releases its uindustrial production data at 11am. This measures outputs of the German factories and mines, and as germany is the biggest economy in the EU, this may well cause volatility in GBPEUR exchange rates.

This afternoon we see the interest rate announcement by Switzerland. This will be an interesting one to watch, as their rate is only 0.5% as it is here in the UK. With little more room to move it will be interesting to see what they do. I predict a 0.25% cut.

Other than that all data today is mainly US based. We have retail sales which will give us an indicator of the economy in the US. Also jobless figures will be released and business inventorys.

So, much here that is likely to cause movements in the current exchange rates. Get in touch today to find out what these data releases may mean for your currency purchase.

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