After making substantial gains in recent weeks, the pound fell across the board yesterday after weaker global economic data affected exchange rates. The pound had risen in the last month from 1.0550 to over 1.13 on the Euro. Against the dollar rates have risen from the 1.30's up to 1.50 this week.
Figures yesterday showed China had the weakest quarterly growth since records began, and there were also sharp falls in EU and US industrial production. The bad news dented the slightly optmistic view this week that the world economy was starting to recover. The dented confidence mean the percieved weaker currencies such as the pound fell victim, as cautious investers moved funds back to the safe haven USD.
US Dollar
"I think we're still in a range... on sterling/dollar... but $1.50 for sterling was about the top of that range, which leaves more risk to the downside for the pound," Standard Bank currency strategist Steve Barrow said. So it looks like after a steady run for the pound, things are starting to correct and come back the other way.
"When risk appetite starts to come off, the currencies that will suffer the most are those who have gained the most recently, and sterling has been one of the best performing currencies," said a Market Strategist at CMC markets.
Euro
Sterling Euro exchange rates did not suffer as badly, but this is only due to comments by the ECB president. The head of the European Central Bank warned that confidence is low, and that further rate cuts and possibly other measure will be needed to restore confidence. The possibility of even lower EU rates weakened the currency, and effectively cancelled out the losses for the pound.
Rates are still at 1.13 but expect levels to drop away possibly today and into next week as more UK economic data is released.
Todays Data
EU
We have the Trade Balance data being released shortly. This is the balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the EUR. If a steady demand in exchange for exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the EUR and may cause exchange rates to drop.
Canada
4 different measures of the Consumer Price Index are released at midday. This indicated inflationary pressure on the canadian economy, and gives insights as to future interest rate movements, which regular readers will know often have a direct impact on exchange rates.
USA
The Federal Reserve Chairman Ben Bernanke gives a speech this evening. He gives a press conference as to how the Fed observes the current US economy and the value of USD. His comments often cause volatility in GBPUSD rates.
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