20th August 2010
Good morning. The pound had a good day yesterday, climbing after better than expected Retail Sales showed that consumer confidence is higher than thought. The Euro strengthened against the US Dollar, limiting GBP/EUR gains. Rates as at 08:30am this morning are as follows:
Sterling gains on Retail Sales
- GBP/EUR 1.2145
- GBP/USD 1.5546
- GBP/AUD 1.7459
- GBP/NZD 2.2046
- GBP/CAD 1.6183
- GBP/CHF 1.6030
- GBP/ZAR 11.333
- GBP/JPY 132.66
- GBP/HUF 336.37
- GBP/NOK 9.6375
- EUR/USD 1.2815
Retail sales in July rose much faster than expected, and sales volumes jumped 1.1% compared with June, the Office for National Statistics (ONS) said. Analysts had forecast a rise of just 0.4%, so the better than expected numbers helped push the pound higher during trading yesterday.
That marked the highest month-on-month increase since February. "It doesn't look for now like the slowdown emerging in the rest of the economy has spread to the High Street yet," said Vicky Redwood from Capital Economics.
The British Chambers of Commerce (BCC) said the numbers were "particularly welcome as they come after a good figure in June, which may have been inflated by World Cup-related spending".
"The figures provide an early indication that economic growth will remain in positive territory during the third quarter of the year," commented David Kern, chief economist at the BCC. "However, there is no room for complacency," he warned. "The full impact of the emergency Budget's austerity measures is yet to take effect."
So, the news was cautiously welcomed by the markets, but fears that once the spending cuts and tax rises start to take effect, Sterling's strength may end and exchange rates could fall.
Euro strengthens vs US Dollar
The pound rose well against the US Dollar yesterday, but not by as much against the Euro. So why was this? The Pound's response is probably exaggerated because the euro was strengthening simultaneously versus the dollar. So, as the Euro strengthened in tandem with the pound, gains were limited.
Where will exchange rates move in August/September?
Sterling has had a good run recently, and in the long term most analysts expect Sterling to gain against the Euro, USD and other major currencies. In the short to medium term however, the looming cuts and tax rises the UK is facing will likely push the pound lower. So, things may well get worse before they get better.
If you need to buy currency with Sterling in the next 3 to 6 months, then contact us today to discuss the different options available to help you achieve the best possible rate within your time frames.
Remember, whilst the natural inclination is to go to your local High Street bank to make an international transfer, this is usually a fairly expensive way of doing it. Our rates are up to 5% better than the banks offer, and so we can help you save a significant sum on your foreign exchange.
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There is hardly any data of note today, other than some figures from Canada. So, today rates will likely only be affected by international investors and traders winding up positions ahead of the weekend. Given the strength in the pound this week and concerns over austerity measures, investors may pull out of Sterling today, so we expect the pound to be pressured in trading this afternoon.
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Labels: August/September forecast, Retail Sales, Sterling Gains