Pound vs Euro
Last week we witnessed a turbulent week for Sterling against the single currency with a 4.5% fluctuation in exchange rates on Friday alone. This equated to a difference of an astonishing £7500 when purchasing €200,000. The movements came following the UK election and the hung parliament verdict that came out of it.
The week had begun so well with the Pound opening at 1.1530 racing to a high of 1.1865 by Thursday. This was mainly down to the riots seen in Greece and the increased speculation of a credit rating cut for Portugal, Spain, Italy and Ireland sending the Eurozone into meltdown. The highs seen represented some of the best buying levels seen for 12months as seen in the graph below.
The UK election then took centre stage and the hung parliament verdict was anything but well received by the currency markets. As mentioned earlier in the report the rate plummeted from €1.1865 down to €1.1357 in a shift seldom seen in the markets.
The Pound did rebound in the afternoons trading session after Conservative leader David Cameron talked openly of the potential for the Tories and Liberal Democrats to form a coalition to bring the UK through the crisis it has been in for some time.
The week ahead promises to be another volatile week as the backlash of the election will still be prominent in the news. The other news of note this week comes in the shape of the Bank of Englands interest rate decision on Monday at midday, and the industrial production figures released on Tuesday at 9:30am. Wednesday sees this months unemployment figures, a release known to cause high volatility depending on the reading. See below for a more detailed report on this weeks data releases.
Pound vs US Dollar
A good week for cable saw its investor confidence sore making huge gains on the Euro and Pound. With the Election and Greek problems dominating the headlines this week the USD reputation as a safe haven currency was clearly evident ending the week on 1.2622 on the EURO and 1.4650 against Sterling.
However last week we did see U.S. stocks fall a day after the market’s biggest plunge in a year as concerns over Europe’s debt crisis and the integrity of American trading systems tempered optimism spurred by a surge in jobs growth. This then caused an unexpected drop on the Dow Jones which saw some recovery on Friday.
The US Federal Reserve held interest rates at a 0-0.25% range as expected, but appeared more upbeat about the economic growth outlook. This view was supported by the latest data; US new home sales surged, whilst factory activity and consumer confidence both rose strongly. The first estimate of first-quarter 2010 growth in GDP was 3.2%.
If you are looking to sell any dollars in the near or upcoming future now would be a good time at potentially looking to fix the rate.
A ‘Forward Contract’ can allow one to obtain a rate of exchange for anything up to 2 years in advance protecting an investment against any pitfalls in the market sector.
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With the continued threat from the Euro Zone Debt and credit rating problems and the UK’s Hung Parliament negotiation process, Sterling could still suffer or benefit from the additional unscheduled developments. The following scheduled market data is still relevant and could still have a significant effect on your transfer.MondayFor the UK the week begins with the closely watched Bank of England (BOE) interest rate and Quantitative easing (QE) decision scheduled for midday, a positive sentiment from any accompanying statement could provide Sterling strength. Europe’s contribution comes from Germany with the announcement of its Trade Balance; this is a measure in the difference in value between imported and exported goods a higher reading is seen as positive for the currency.
Manufacturing Production data for the UK is due for release first thing and for the AUD the Annual Budget will give us an indication of the domestic government spending and borrowing levels which can have a significant impact on the economy, increased spending generates work and creates jobs, while borrowing levels provide insight into the nation's underlying fiscal position.
WednesdayStarts of with the German first quarter GDP results, actual or better than expected reading could provide the Euro support. The UK releases Claimant count data which measures Change in the number of people claiming unemployment-related benefits, watch for an increase as this could weaken sterling. A short while later the BOE Inflation report will be announced, this report includes the BOE's projection for inflation and economic growth over the next 2 years. The BOE Governor also holds a press conference to discuss the report's contents upon release; a positive sentiment could strengthen sterling. Finally Canada and North America release their Trade Balance data.
Sees the release of unemployment data from Australia and North America, Retail sales data from New Zealand and Trade balance figures for the UK. Each has the ability to cause volatility in the markets dependant on their respective outcomes.Friday
Ends the trading week with retail sales data from the US, as always, to discuss the Impact of data releases on your particular requirement, contact us today for a free consultation on the direction of the markets.
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