Good morning. Today we'll look at the Euro, and a breakdown of all the weeks data that will likely have an impact on exchange rates. First, the usual snapshot of rates as at 08:30am:
Pound vs Euro
So what's happening with Sterling to Euro? Last week rates hit a new 19 month high, but on Friday weaker than expected Industrial data from the UK hit the pound and rates have since fallen away.
What most people want to know is if rates will continue climbing or if they will fall back away. I would also like to know! There is nobody that can accurately predict exchange rate movements, and the market is so volatile at the moment things could go either way.
This week EU leaders meet to discuss the crisis and try to agree to a robust plan to sort out the problems plaguing the single currency. This will likely be the main driver for rates this week. If no plan is agreed, and more questions than answers are raised then it may weaken the Euro and create buying levels at a better rate.
However if they agree a robust plan to sort the problems, it may boost confidence in the single currency and investors will buy again, strengthening it to make it more expensive.
So at the end of this week, we could be at €1.22 or we could be back at €1.15 - it's impossible to predict. What we do know is rates are very close to the best for 18 months, and while rates may creep up slightly, it's more likely we will see a retraction back to the €1.15's where we were in mid may. So, there's much more to lose than there is to gain if you are buying Euros.
If you don't want to take the risk in such a volatile market, contact us today to fund out about our Forward contracts. This is where you can fix today's rates for up to 2 years into the future, and only pay a 10% deposit. This protects you from a downturn and allows you to budget knowing the true Sterling cost of your Euros.
This Weeks Data
Ok, let’s take a look at the week ahead and what data releases may affect exchange rates. But just how do these data releases affect rates? Economic data will, for the most part, already have been forecast and priced into the market. What affects exchange rates is whether the actual figures differ to what’s expected.
For example, high jobless figures for the UK may not weaken the pound. If the jobless rate is high, but not as high as expected, then it may cause the pound to strengthen slightly. Remember, it’s how the actual figures compare to what’s forecasted that will drive exchange rates. Contact us today to discuss how the below data can impact on the cost of your currency purchase, and the tools we have to protect against adverse rate movements.
Monday
It’s the Queens birthday today, so markets are closed in Australia. Elsewhere the main news is from the EU where the leaders meet today to discuss the ongoing problems in the Eurozone. Watch for comments after this meeting as this could cause volatility. We also see Industrial Production from the EU. The same data was released for the UK on Friday which caused the pound to fall, so this news may create some volatility in GBPEUR rates. We also have some UK house price data at midnight tonight.
Tuesday
A very busy day today for data. After their day off yesterday, the Aussies release the minutes of their recent interest rate decision. Comments that support further rate rises may strengthen the AUD wiping out the recent gains in GBPAUD rates.
It’s also a big day for UK data, with Consumer Price Index and Retail Prices. These measure inflation and consumer confidence respectively, and it can cause movements in Sterling exchange rates. For the EU, Trade balance figures will be watched along with the German ZEW survey that measures economic sentiment. In the USA, Import prices are the main news.
Wednesday
There are unemployment measures today for the UK that will be closely watched and may affect the value of Sterling. In the EU, we have inflation measures that will impact on future interest rate hikes. High inflation may strengthen the currency and vice versa.
In the USA we have produce prices, which again is an inflation measure. As with the EU, higher figures than expected may cause GBPUSD rates to fall, and vice versa.
Thursday
An interest rate decision in Switzerland should be noted for those looking to buy CHF. In the UK, Retail sales will give an idea how consumers think the economy is recovering. In the USA, there are many figures today including Consumer Prices and Unemployment data.
Friday
A quieter day on the markets data wise. Some inflation figures from Germany and mortgage approvals from the UK are the only data releases of note
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