Todays Economic Data
Let's take a look at what data releases we have today, and what this will mean for Sterling exchange rates:
We have already seen the German Gross Domestic Product data this morning. This was much worse than expected for both the monthly and yearly figures. In fact they were almost 1% worse than expected, showing that Germany, which is the largest economy in the EU, is in bigger trouble with the global recession than analysts had expected.
The severity of the contraction has surprised economists, and also surprised the currency markets as we can see from the rise in rates this morning:
Here you can see the immediate effect on the pound to euro rate. The weaker than expected german data weakened the Euro making it cheaper to purchase, and so exchange rates have recovered.
Yesterday there was little UK data released, however Sterling is still moving on reaction to the poor forecast for economic recovery from the Bank if England. Today is mainly EU and US data, and so we may well see movements through the day for both GBPEUR and GBPUSD:
GBPEUR
For the Eurozone, we have further Gross Domestic Product data, which is a measure of the total value of all goods and services produced by the Eurozone. If the figures are worse than expected like the German figures were, then we may see even further Euro weakness, and rates may climb back above 1.12.
We also have Consumer Price Index data, which is a measure of inflation and can give insight as to likely interest rate movements in the Eurozone. If the data lends itself to further interest rate cuts in the Eurozone, then again we may see weakness and a climb in rates.
GBPUSD
For the US we also have Consumer Price Index data. This will be less important than the Euro figures, as interest rates are already as low as they can go in the states, so there is no room to move further. We also have manufacturing data for both the US and Canada - this gives an idea how these big sectors in the economy are performing, and so have a direct effect on both GBP/USD and GBP/CAD exchange rates.
When to purchase your currency
There is nobody that can accurately predict exchange rate movements. If we could, then we would all be millionaires! What's important is timing your purchase to limit the risk of adverse exchange rate movements, and making sure that you dont pay more for your currency than necessary.
The markets are extremely volatile at the moment, given the scale of the global economic downturn. Rates are rising then falling by the day with no consensus on where things will end up. Doing nothing and just relying on blind hope that rates will rise is a high risk strategy means relying solely upon a spot contract and one won’t know the rate of exchange achievable until the actual point of buying the currency.
The markets do move both ways, so it could result in a win (or lose) situation, however it does make budgeting for the future virtually impossible.
If you need to buy currency within the next 12 months, then register
a free account with FCG today, and we can then give you a consultation on the different options available to you, allowing you to make an informed chioce on what to do, and when to do it. Dont leave it to chance.
