Sterling remained under pressure on Monday after dipping to two-month lows against the dollar late last week after a spate of weak UK economic data. Rates @ 08:30am are as follows:
GBP/EUR 1.1221
GBP/USD 1.6083
GBP/AUD 1.8211
GBP/NZD 2.2736
GBP/CAD 1.7019
GBP/CHF 1.6791
GBP/ZAR 12.376
GBP/JPY 146.61
GBP/NOK 9.3891
EUR/USD 1.4327
Pound to Euro
Last week saw Sterling steadily climb against the Euro, reaching highs not seen since early November. This was more due to Euro weakness than Sterling strength, with several credit rating agencies reducing the credit ratings of Spain and Greece, undermining the single currency.
Another factor supporting Sterling last week was renewed optimism over the credit problems in Dubai, as Abu Dhabi is now looking likely to be able to cover any shortfall in repayments. This came as welcome news to UK banks, who are believed to have up to £5bn exposure to the situation.
Looking to the week ahead, markets may be a little quieter in the run up to the Christmas break, with many questioning whether the current Euro weakness is a sign of things to come, or whether these setbacks are temporary.
Despite a bank holiday on Friday, we have plenty of significant data releases coming up. Tuesday sees the final UK GDP figure for Q3, with some analysts expecting a further upward revision to a narrow 0.1% contraction, extremely close to coming out of recession. We also have Bank of England minutes from the meeting earlier in the month, likely to provide insight into monetary policy going forward for 2010.
USD
The British Pound slipped to a fresh monthly low of 1.6053 last week against the US Dollar following an unexpected drop in U.K. retail sales. The GBP/USD is likely to face increased volatility as the final 3Q GDP report (Tuesday) and the minutes of the Bank of England policy meeting (Wednesday) will be the highlights of a holiday-shortened week.
Economists expect the Office for National Statistics (ONS) to revise up its estimate of gross domestic product (GDP) growth to just -0.1pc or possibly zero. The CBI has also predicted that, regardless of the third quarter revision, the recession will be over by the end of the year.
It forecasts that economic output will have grown 0.5% between October and December. If these predictions prove correct it is likely to strengthen Sterling and has the potential to recoup the recent losses benefiting those wishing to buy the Dollar.
Across the pond in the US attention will also focus on the release of US GDP figures for the third-quarter of 2009. If the market's consensus of growth above 2.0% proves correct, the Dollar could make further headway benefiting those wishing to sell their Dollars to purchase Sterling.
In short we could see a very volatile week of exchange rates prior to the Christmas holidays and possibly lasting until the New Year, to safe guard yourself from any undesired shifts please contact your FCG account manager to discuss the various options available to you.
Here at FCG, we will be working normal hours aside from bank holidays, so please do give us a call to discuss your currency requirements further.
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