30th July 2010
Good morning. Sterling to Euro rates fell yesterday throughout the day, dropping from €1.20 down to the low €1.19's. The reason for the fall was better than expected confidence data from the EU, which strengthened the single currency making it more expensive to purchase. Rates at 08:30am are as follows:
- GBP/EUR 1.1957
- GBP/USD 1.5620
- GBP/AUD 1.7368
- GBP/NZD 2.1637
- GBP/CAD 1.6156
- GBP/CHF 1.6218
- GBP/ZAR 11.424
- GBP/JPY 134.84
- GBP/NOK 9.499
- EUR/USD 1.3059
The Euro-zone data was again stronger than expected with gains for business confidence while there was a further decline in German unemployment which helped underpin sentiment towards the economy. The better data was welcomed by the markets, and the single currency gained strength throughout the day. The good data coupled with more confidence in the bank stress tests mean investors are happier to have funds in Euros.
Sterling remains firm despite Euro strength
The latest UK mortgage lending data was weaker than expected with a drop in approvals to the lowest level since February. The markets mostly shrugged off the poor data however with little change to the pound. The consumer lending data disappointed as well with a monthly decline in consumer credit. With incomes under pressure and weak credit growth, there will be surprise over the recent strength of retail spending data.
There will also be expectations of a slowdown in the housing sector and doubts over the UK economy are liable to increase. This could eventually sap support for Sterling, especially as there will be further doubts over the prospect for higher interest, but for the moment Sterling seems to remain supported due to a weaker US Dollar.
Pound to US Dollar
The majority of UK data has been surprisingly good of late, with second quarter GDP and July CBI retail sales the standout releases, in contrast to a string of disappointing U.S. data, with advance Q2 U.S. GDP seen as the next focus for the market on Friday. The combined effect has been to push Sterling to US Dollar rates to the best for nearly 6 months.
Today the EU releases the unemployment rate. In Canada and the USA, GDP figures will be watched closely. Last week, better than expected GDP helped push the pound higher, illustrating how the measure of economic growth can affect exchange rates.
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Labels: Market Data, Sterling Euro Outlook