Good morning. The pound has fallen from it's 7 week highs against the Euro and US Dollar. This morning we'll look at a detailed report on what's moving pound to Euro rates, in addition to a breakdown of the weeks economic data.
Pound vs Euro
The past week has seen movement of a slightly less volatile nature than what we have seen in recent weeks for the Sterling- Euro currency pairing, with a 1.8% shift between the highs and lows of the week, to put this into monetary terms it would mean a difference of £3,600 on a £200k trade.
Sterling began the week strongly, anticipation of a change of government hanging optimistically in the air leading up to Thursday’s groundbreaking televised debate between main party leaders. Despite common belief that the policies revealed in this would have an affect on the market, we have actually seen very little change, mainly due to a lack of any hard line financial policy being revealed.
That said, Nick Clegg’s performance could prove to have a huge impact, if the Liberal Democrats receive a higher percentage of support in the opinion polls, fears of a hung parliament will undoubtedly have a negative impact on Sterling.
Tuesday saw the release of the Trade Balance; this is a balance between exports and imports of total goods and services in the UK. A positive value shows trade surplus, while a negative value shows trade deficit. The actual deficit revealed was a lot smaller than was initially anticipated at -2.1billion. This produced some volatility for GBP but was not of great significance. If a steady demand in exchange for UK exports had been seen, it would have turned into positive growth in the trade balance, causing further positive movement for GBP.
This coming week is set to produce several significant data releases. On Tuesday the Consumer Price Index (CPI) is released. It is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends.
The Gross Domestic Product (GDP) is a measure of the total value of all goods and services produced by the UK, this is released on Friday. The GDP is considered as a broad measure of the UK economic activity and health.
With these impending releases, an air of uncertainty encapsulates the market, meaning it would be the ideal time to lock in a rate with the Foremost Currency Group through means of a forward contract or placing a stop loss or limit order, allowing your currency to be traded at a specified rate to protect against any unfavourable movement. Please contact us for further information on how these tools can be implemented.
Security in your currency exchange is paramount in such unpredictable times and this is provided by a forward contract, where you can lock in a rate for up to two years. Those with impending purchases in the Eurozone might look to consider booking a Forward contract with the Foremost Currency Group. By placing a 10% deposit, clients can eliminate the risk of an unstable GBP/EUR rate by locking in a price today for a transaction that will take place in the future, up to maximum of two years.
With all of these factors in mind, it is of utmost importance to speak with your specialist account managers to ensure you know all of the options available to you , ensuring you can make the right decisions when it comes to exchanging your currency, please feel free to contact us for a free consultation.
This Weeks Data
Below is an outline of the week’s data releases, day by day. Economic data is something that can have a big impact on exchange rates and the cost of your currency, and so is important to consider. To find out exactly how the data below may affect rates, open an account with us today.
This is free to do, and one of our expert FX Traders can then give you a free consultation on the currency you need to buy, and give you an insight into how the data below may affect rates. A consultation can also inform you of all the options available to you, helping you to achieve the best possible rate and provide you the information you need to make a decision on when to time your purchase; just one of the advantages of using the Foremost Currency Group for your Foreign Exchange needs.
Do bear in mind that in addition to the scheduled releases, unexpected news such as opinion polls with regards to the election and developments in Greece will also have an effect on exchange rates. For this reason, having an account and giving your FX trader an outline of your requirements mean you can be kept up to date with developments that may impact the cost to you.
A very quiet day for data releases following yesterday evenings UK House Price Data. We have Consumer Price Index for New Zealand. A high reading means a bigger chance of interest rate hikes in New Zealand. In turn, this may strengthen the NZD making it more expensive.
Consumer Price Index data for the UK, as already outlined in our Euro report. From the EU, we have Producer Prices for Germany along with the ZEW survey. This is a measure of Economic sentiment, and as such can affect the value of the Euro. A reading above 50 is seen as positive – we expect a reading of 45.2 which is already priced into the market. Also watch for Australia RBA minutes which may provide volatility for AUD.
Big day for the UK today. We have earnings data, the Bank of England minutes, and various measures of Unemployment. These readings together will give an idea how the recovery is going in the UK, and if figures are better than expected, we may see Sterling strength, and vice versa. In a nutshell releases like this affect confidence and sentiment, which in turn drives investment towards/away from the pound, affecting its value and exchange rates.
Inflation data from the EU along with UK Retail Sales will likely cause some volatility in the GBP/EUR cross. Later in the day the focus is on the USA when we see producer prices and housing market data. Good US figures could cause the USD to strengthen – it’s important to note that GBP/USD is near a 2 month high – good figures may reverse this recent trend so the current buying opportunities may be limited. Contact us today to discuss if you need to buy or sell US Dollars.
We end the week with GDP for the UK as outlined in our Euro report. There is also an assessment of industry and confidence from Germany – the biggest economy in the EU. Later in the day we have Home sale data from the US along with Retail Sales from Canada.
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