Last Week
After a gloomy budget already well covered here last week, sterling fell in a big way, hitting a 2 week low against the Euro, after data showed the economy's fall in Q1 was its fastest in 30 years, casting doubt on the government's 'fantasy' economic outlook.
The pound did recover slightly at the end of the week against the dollar, but remained poor against the Euro, dropping from a high above 1.13 back to around 1.10. Sterling also faced pressure after a UK newspaper reported that ratings agencies like Moodys were concerned about Britain's rising debt levels - as indeed the general population are!
In the budget it was said that the national debt would reach £1.4 tn pounds in the next five years - this obviously did not help the pound. I read an interesting article in the Sunday Times yesterday that the measures will cripple an entire generation.
GBPEUR this week - a rise on the cards?
As outlined already in this blog over the last week, the pound had a battering following the budget. There is not a huge amount of data for the UK this week, but there is a lot from the EU.
Depending on how the figures are, I think we may see a weakening of the Euro this week. All focus in recent times have been on the pound, and our interest rates are close to zero and the only measure we are now taking is borroring more through quantitative easing. Focus now will shift to the Eurozone, where there is still plenty of scope to cut interest rates.
There are various measures of confidence in the EU this week, which will give a clearer idea if cuts will happen next month. If data is poor, then expect a weaker euro and higher exchange rates. If there is a spike in rates than do be aware it could well be short lived.
Clients that have a trading facility open and ready to use, are those that will be able to benefit from a spike in rates and not miss out on any opportunities to buy at a better rates. To open an account for free without any obligation, please click the orange banner at the bottom of this post.
Swine Flu - GBP/USD may fall as a result
EU have already started to be traded lower this morning, as fears over the impact of a possible swine flu pandemic weighed heavily on an already weak global economy. It's boosted demand for traditional safe-haven assets like the US dollar.
"If swine flu morphs into a pandemic, it's the last thing the world economy needs, as it's already on its knees," said an economist at Lloyds. During times of global flu pandemics, three trends take place: equity markets fall, the dollar strengthens, and there's a flight to quality, he said. So, this demonstrates clearly how things other than economic data released can affect exchange rates.
This weeks Data - How do these economic data releases affect exchange rates? Well, it's one of the most important factors. Analysts will already have predicted what the results of these releases will be, and investors and traders will already have moved their funds in anticipation of higher returns. If however the figures are any higher or lower than predicted (which is often the case!) then the markets and thus exchange rates will correct accordingly.
It's imperative then, if you have a currency requirement, that you know what releases are upcoming, and the likley effect on the markets so you are not unduly exposed. This is where contracts like Forward Contracts, Stop Loss and Limit Orders can protect you from the market fluctuations.
As you can see below, this week is an extremely busy one in terms of economic data releases. Where last week was all about UK data such as the budget, this week we have lots of releases for the Eurozone. The ECB president gives a press conference today as to how the ECB observes the current European economy and the value of EUR. His comments may determine a short-term positive or negative trend, so watch GBPEUR rates today.
Wednesday is very important, as we see various measures of confidence from the EU also. After big drops in the pound last week, all eyes are on the Eurozone. There may be an interest rate cut next month for the EU which could improve pound to euro rates, and there is also talk that the ECB may start a foray into quantitative easing, much like the UK have already done.
So, rates may improve, but do be cautious - it's like a tug-of-war where the decline in UK economy is pulling one way, and possible measures in the EU are pulling on the other. Who will win? Nobody knows. Clients that have a requirement to purchase Euros are gambling the cost of their purchase on this tug-of-war, and if you dont want to lose out, then talk to us about tools we have available to protect you whichever way markets move.
Monday
Germany - Consumer Confidence
UK - Mortgage Applications
EU - ECB President Speech
Jap - Retail Sales
Tuesday
Germany - Consumer Price Index
US - Consumer Confidence
US - Trade Balance
Wednesday
Jap - BoJ Monetary Policy Report
Interest Rate Decision
NZ - Business Confidence
Interest Rate Decision
EU - Consumer Confidence
Economic Confidence
Industrial Confidence
US - Mortgage Applications
Gross Domestic Product
Interest Rate Decision
Thursday
Aus - New Home Sales
Business Confidence
Ger - Unemployment
Retail Sales
UK - Nationwide House Prices
US - Jobs Data
Personal Income
Personal Consumption
Employment
Friday
UK - Money Supply
Mortgage Applications
Purchasing Managers Index
US - Factory Orders
ISM Manufacturing
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