Sterling GBP Euro EUR
Sterling made steady gains yesterday, after better than expected retail sales data. Some analysts say the figures are skewed slightly because its over the easter period, when sales are often artifically inflated.
The effect of swine flu as outlined in yesterdays report stemmed the pounds gain, as traders moved towards the Yen and USD as they do in times of uncertainty.
Today for the EU we have Industrial Confidence (index that measures the level of industrial executives confidence in economic activity), Consumer Confidence (measures the level of consumer confidence in economic activity) & Economic Confidence (survey of consumers confidence in economic activity). On there own the releases are normally fairly minor, however together they will be taken as a barometer of how investers see the European economy faring.
There is talk of cutting interest rates in the EU next month, and also money may be created. After a horribly few weeks for the pound, I believe that the data will be poor and focus will shift to the EU. We may see a weakening of the currency, and a rise in exchange rates, but as I stated yesterday, I think the best we can hope for is 1.12/1.13 or so.
Sterling GBP to Yen JPY
In early trading yesterday, Sterling/Yen hit a 1 month low of about 1.39 as escalating worries about the potential for swine flu to spread knocked global shares and prompted buying of the yen and the dollar -- considered safer bets in times of uncertainty. This strengthened those currencies. When the headlines dissapear, so will risk aversion and we will probably see a recovery in rates for these currency pairs.
Sterling GBP to US Dollar USD
As outlined above, movements to USD and Yen due to the flu story have weakened these currencies. Today we have some very important US data that will no doubt move rates:
- 12:00pm Mortgage Approvals
- 13:30pm Gross Domestic Product (GDP)
- 13:30pm gross Domestic Purchase price Index
- 19:15pm Fed Interest Rate decision.
I dont expect any movement in interest rates - they are already rock bottom and can't move any further. Keep a close eye however on the GDP figures - they are expected to show a decline of 5% - watch this closely as any variation lower or higher will affect GBPUSD accordingly.
Sterilng GBP to New Zealand Dollar NZD
We have the INterest rate decision from New Zealand tonight at 10pm - I expect a 0.5% cut in rates to bolster the economy. This is widely expected, so probably mostly priced in to the GBPNZD rate already, although we may see it rise slightly. We also have some industrial data from Japan, but this is being overshadowed by the Swine Flu strenthening the yen.
Waiting for rates to rise?
Be wary, as although we may see other currencies weaken, persistent weakness in the global banking system has battered Sterling months sue to the dependence of the UK Economy on financial services sector. until the issues here are resolved, we will continue to see the pound struggle, although we may see short term spikes here and there as focus shifts to other countries.
It's times like these that tools such as Stop and Limit orders along with Forward contracts offer you protection against adverse exchange rate movements.
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