Pound vs Euro
The Pound weakened against the Euro after a report showed a greater-than-expected increase in government spending in the fourth quarter, adding to concern the U.K. may struggle to manage its rising debt levels.
Sterling headed for a second weekly decline versus the single currency after data showed state spending increased 1.2 percent. Revisions to gross domestic product data showed the economy shrank 6.2 percent since the first quarter of 2008, making the recession the deepest on record.
With this recent downtrend on GBP/EUR this could be a great opportunity to look into a forward contract.
A forward rate can protect your currency against any pitfalls within the market safeguarding your transactions against any further market downturns. You can purchase a ‘Forward’ for anything up to 2 years in advance with a 10% deposit.
With the pending problems in the Greek financial sector we may see Sterling Strength if Germany and France decide to come up with a ‘Bail Out Plan’, however on the flip side the ‘Bail Out’ could be seen as positive move from the Euro as it will show solidarity from the Euro Zone as whole.
If you have a Currency Requirement up and coming it maybe worth getting in contact with us sooner rather than later and discussing the options available to you. Contact us today for a quote.
Pound vs US Dollar
Last week saw the Dollar continue to gain strength against the beleaguered British Pound. We started the week positively, approaching 1.55 at interbank levels. As the week went on, we saw Sterling depreciate, down towards the 1.51 mark, a difference of over £3000 on a $200,000 purchase.
When looking at the recent data releases, this becomes increasingly puzzling, as most UK data such as the much anticipated GDP revision on Friday came out as positive. There are two primary factors causing the exchange rate to move downwards.
The first is renewed risk aversion in the markets, due to the financial problems in several Eurozone countries, which has caused investors to move their funds into the US Dollar, giving it extra strength and momentum. The second factor is the growing concerns over the budget defecit in the UK. The Conservative party has promised an emergency budget if elected to try and cut spending, which cast further doubt over the economic situation in the UK.
Looking to the week ahead, we have the Purchasing Managers Index for Manufacturing on Monday and Services on Wednesday. From the US, we have the PCE and earnings data on Monday, with the monthly Non-Farm Payrolls report on Friday.
This Weeks Data
There is significant data from various economic zones this week that will likely affect exchange rates. This week there are similar releases for different zones, and so in a different approach to usual, this week we’ll look at the data in turn, as opposed to each zone in turn;
Gross Domestic Product (GDP)
What is GDP? It’s a basic measure of a country's overall economic output. It is the market value of all final goods and services made within the borders of a country in a year. It’s taken as a sign of overall economic performance and whether an economy is expanding or retracting.
Last week showed a slight upwards revision to UK GDP; however this did little to affect rates. This week we have GDP data for Canada, Switzerland, Australia and the Eurozone. Watch these closely, as if figures are different than forecast, it will have an immediate effect on the currency concerned.
Interest Rates
Why do these affect exchange rates? If a country has high rates, it’s attractive for investors and so spurs investment into that area. High rates generally strengthen a currency. The UK’s rate is expected to remain low for some time, and so this is contributing to GBP weakness. This week we have Interest Rate Decisions for Canada, the UK and the EU. It’s likely other countries will raise rates before we do, and so this means it’s likely the pound will lag behind other currencies.
Retail Sales
This shows the performance of the retail sector in the short term. The changes are widely followed as an indicator of consumer spending. In a nutshell, it’s a barometer of consumer confidence, and so investors watch this closely and good results spur investment and can strengthen a currency, and vice versa. This week we have Retail Sales for Europe, and Germany, so this may affect the Euro.
Other data releases are below. As always, contact us to discuss your particular requirements, and one of our experienced traders can give you specific information on how particular data releases may affect YOUR exchange rate.
Monday
Ger – Purchasing Managers Index
UK – Mortgage Approvals
UK – Consumer Lending
UK – Purchasing Managers Index
EU – Unemployment
Can – Gross Domestic Product
US – Manufacturing Data
Tuesday
Aus – RBA Interest Rate Decision
Can – Interest Rate Decision
Swi – Gross Domestic Product
US – Fed Beige Book
Wednesday
Aus – Gross Domestic Product
Ger – Retail Sales
EU – Retail Sales
US – Employment
Thursday
Aus – Trade Balance
Eu – Gross Domestic Product
UK – Interest Rate Decision
EU – Interest Rate Decision
US – Jobless Claims
US – Home Sales
Friday
UK – Halifax House Prices
Ger – Factory Orders
US – Non Farm Payrolls
US - Earnings
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